Fractal Analysis: Gold to $3,500 this year still likely despite crash

While gold news has reported that gold took a plunge on Wednesday, one technical analysis still sees an overall strong upward trend for the precious metal. This analysis sees gold going as high as $3,500 to $3,600 sometime this year and the author gives several reasons for why gold will continue to rise.

Author: Goldrunner Posted: Thursday , 01 Mar 2012 Mineweb

TORONTO -

As we have discussed in a previous article, our Fractal Model suggests the wave for Gold in US Dollars will sweep up into the $3500 to $3600 area into the mid-year time-frame. The leading edge of that time-frame begins in May and extends out for a few months. A potential for Gold to spike to a $3900 extended fib level exists. Like all parabolic moves in Gold, the late stages create the biggest price movements. Personally, I would be happy with a huge Gold run up to the $3200 level.

Our description of the Gold tsunami wave to come this year as a result of the huge wave of Dollar Inflation initiated by the $600 Billion US Dollars sent to Europe back in December of 2011 is beginning to be noticed by the markets. This is a very important "point of recognition."

The fundamentals for this wave in gold are as follows:

  1. The massive world debt load demands that we either see a deflationary depression; or that we devalue the debt by devaluing the paper currencies. The politicians have chosen to dramatically devalue the paper currencies.
  2. The Federal Reserve is the only Central Bank with the right to print to infinity, thus, US Dollar printing will remain the leader going forward.
  3. Gold moves almost directly inverse to the value of the Dollar. Thus, the acceleration of Dollar Devaluation will drive the price of $Gold in its accelerating parabolic climb. (The USD Index has little to do with the "value of the Dollar" as we will soon show via "The Fractal Dollar" in a different writing.)
  4. This current leg of Dollar Printing via in the $600 Billion Dollars sent to the European Central Bank in a swap arrangement back in December of 2011 is just the start of this wave with Dollar printing demands to increase the debt ceiling, to cover losses by Fannie and Freddie, to continue to pay extended unemployment insurance benefits, and so on. Yet, the "lowly sum" of $600 Billion of Dollar Printing via QE drove Gold up to the $1920 level, and that much kicked off this round.
  5. Debt monetization via QE sends no new Dollars directly into the economy since the newly printed Dollars go directly from Uncle Sam's hands to cover the item listed, above. Thus, these newly printed Dollars only "replace Dollars" that were never allotted for all of the above items and other responsibilities like the unfunded Social Security Funds and Federal Pensions. As such, the economy is not directly helped by the new Dollar printing. As the economy continues to deteriorate it demands an acceleration of new Dollars to be printed. It's like a cat chasing its own tail.
  6. The US needs to devalue the US Dollar to the point that the debt is devalued to manageable level. The Dollar is devalued against "relatively constant valued Gold"; just like the late 70's when Gold went parabolic. Unfortunately, the massive amount of Dollar printing this time around could not be done via the loan multiplier system where the new Dollars go directly into the economy. So Dollar creation via direct debt monetization, QE, had to be done after the loan multiplier system was "blown out" in 2007 and 2008.
  7. The talk about "manipulation of the Gold Market" was in reference to the government's need to prevent Gold from going into "free-rise", prematurely, before the cycle point the above would have been jeopardized. Now, we are past that point in the cycle, and the government "needs Gold to go parabolic" to devalue the huge debts. The government needs the huge Dollar Devaluation to happen fairly quickly to prevent the economy from completely tanking. This is a "fractal cycle" that periodically repeats through history creating the Gold parabola, and like all fractal cycles there is a "fractal time factor" in play. This cycle does not seek to destroy the US Dollar, but ultimately, to prevent its destruction- though the Dollar will have to be backed by something of value in the end.
  8. As the huge Devaluation of the Dollar starts its more aggressive moves, everything denominated in Dollars will be devalued along with it. The ONLY way one will be able to "view" the true extent of Dollar Devaluation will be via the chart of $Gold- the ratio chart of Gold to the US Dollar. Watch the chart of Gold drive to parabolic heights like the late 70's while the "Dollar Index" trades sideways to down.
  9. As the chart of Gold blows dramatically higher, it is will represent what is going on in all parts of your life if your life is denominated in US Dollars. Your pension, your social security benefits, your cash in the bank - they will be losing value in a fairly direct relationship to how the US Dollar is being devalued against Gold. This is why Mr. Jim Sinclair says that "Gold is INSURANCE" during this time period. He is saying that Gold will rise inversely to the amount of Dollar Devaluation that is in progress.
  10. After this large run in Gold corrects, the fractal model suggests that Gold will make another run up into the $10,000 to $12,000 territory. We laid out those numbers as the ultimate targets for Gold back in 2007 and 2008 via the fractal work. Numbers for Gold higher than that would suggest the potential for "hyper-inflation."

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