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Sunday, August 14, 2016

The Move to $1,000



August 31, 2009 by · Leave a Comment 

By Howard S. Katz, GoldSeek

Things are looking good, dear gold bug.  Characteristically gold hits its seasonal low in late summer, often in August, and then begins to rise as the month comes to an end.  This late-August drift higher is a sign of the exhaustion of selling pressure and a precursor of the autumn rally (which in many years is quite powerful).

This year is better than normal.  Gold hit its seasonal low in early July.  Its August low was some 25 points above the July low, and the late August lift was quite evident. Tomorrow is September.  Gone are those (few) sharp one-day scares that had us all so worried.  They were merely the results of a few news items causing some of your weak sisters to panic and sell out.  But if you follow the weak sisters (rather than regarding their fear as an opportunity to buy), then you become a weak sister yourself.

THE MAJOR TREND AND THE GRAND CYCLE TREND

The markets can be a challenge, but this appears to be a period when they are easy to predict.  Both the stock and the commodity markets are in a bullish period, recovering from their decline of late 2008.  The point you have to understand is that the stock market is in a bullish major trend but a bearish grand cycle trend.  The commodity markets are in a bullish major trend and a bullish grand cycle trend.  Here is the difference.

The major trend is a move in the markets caused by an action of the central bank (easing or tightening).¬†¬†It usually lasts about 2-4 years (for stocks).¬†¬†(These are the bull phases; the bear phases last half as long.)¬†¬†The grand cycle trend is much bigger and consists of many major cycle trends.¬†¬†It is caused by a large scale economic event which itself affects the behavior of the central bank and influences both the bull and bear (major term) cycles.¬†¬†An example is the Kennedy tax cut of 1963, which brought Keynesianism into¬†America.¬†¬†It led to the creation of money through the late ‚Äė60s, and this caused a rise in consumer prices.¬†¬†However, commodity prices did not (at first) rise and became very undervalued in real terms.¬†¬†By 1971, consumer prices were noticeably higher; commodity prices were the same; and real commodity prices were extremely undervalued.

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