Price of Gold - Historical analogy
 

Mark Twain said that history doesn't repeat itself, but it rhymes. I keep looking back to the 1970's boom to get some perspective on where we are in the cycle.

Looking at the POG from 2001 to its recent top in May 2006 looks a lot like the chart from 1970 to 1975. Gold rose steadily from 1970-1973, at which point it went exponential to $172 in Apr 1974, then trundled along for a while, and reestablished a new peak of $185 in December 2004.

The peak in Apr 1974 looks like the peak in May 2006. The current upswing looks like what happened in late 1974, which would correspond to a new high near $800 sometime later this spring.

This was followed by a prolonged slow decline from 1975 to Aug 1976, during which the price dropped to $110, to where it would have been on the slower rising parabolic curve had it not shot up so rapidly. This probably shook out a lot of weak hands. In current terms, that would be equivalent to the POG declining from $800 later this year to maybe $650 or so by late summer 2008.

What followed was an inexorable rise from $110 in 1976 to a price near $240 in late 1978, with a few dramatic dips and lifts along the way. On our current curve, that would look like a rise to near $1000 by 2010.

Then things got really wild. There was a huge 20% drop in late 1978 that must have caused quite a panic, and forced out another group of holders. On our future curve, that would be like a drop back to $800 during 2011.

This, of course was followed by the final rocket to $800 in early 1980, roughly more than a quadrupling over a 14-month period. That would put our future blow-out price somewhere in the $3000 to $4000 range some time in early 2013.

Interestingly, this timing is very consistent with the projected Congressional Budget Office timing of the social security and medicare "surpluses" beginning their rapid decline, with the surplus becoming a deficit in 2017-2019, and spiralling downward all the way until they start leveling off around 2035.

Well, there you have it! Take it with a grain of salt...

Re: Price of Gold - Historical analogy
 

<TABLE id=HB_Mail_Container height="100%" cellSpacing=0 cellPadding=0 width="100%" border=0 UNSELECTABLE="on"><TBODY><TR height="100%" UNSELECTABLE="on" width="100%"><TD id=HB_Focus_Element vAlign=top width="100%" background="" height=250 UNSELECTABLE="off"></TD></TR><TR UNSELECTABLE="on" hb_tag="1"><TD style="FONT-SIZE: 1pt" height=1 UNSELECTABLE="on">
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<TABLE id=HB_Mail_Container height="100%" cellSpacing=0 cellPadding=0 width="100%" border=0 UNSELECTABLE="on"><TBODY><TR height="100%" UNSELECTABLE="on" width="100%"><TD id=HB_Focus_Element vAlign=top width="100%" background="" height=250 UNSELECTABLE="off">I hope this chart comes up Sparkly. I'm pretty much with you on your thinking, one difference is that Gold went from 35 bucks an ounce in 1969 to a little over a hundred in 1973 witch was a triple. I'm thinking that matched the rise from 250 bucks in the late nineties to 730 in May 06. So my speculation is we havent seen the matching rise to 185 in 1974 yet. What is your opinion on this?

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Re: Price of Gold - Historical analogy
 

I am cautious not to use any price before 1971 as a base for doing ratios, because that was before Nixon took the U.S. off the International Gold Standard, so any prices before then were artificially low.

I think that the peak last May corresponds to the April 1974 peak, and we will have another peak this spring ($750-$800) corresponding to the Dec 1974 peak. Then we could have a 1-2 year decline that's going to shake out a lot of weak hands.

Re: Price of Gold - Historical analogy
 

This will be real interesting, for the 70's chart to match your way, or the way I'm thinking, it is going to start soon, if it doesn't than Gold is following a different path then it did in the 70's.

Re: Price of Gold - Historical analogy
 

If you are right, then this bull is unfolding at about half the speed as the previous bull. In your scenario, it seems like the peak won't occur until almost 2020, and it will be more like $6,000. That may very well be the case.

Either way, it looks like a wild ride. We'd better fasten our seat belts!

Re: Price of Gold - Historical analogy
 

so if we believe in history and charts and predictability....we should all back the trucks up and load up with gold....eventhough the same amount of gold is around and has been around since the earth began so rarity has been the same throughout history...i think the only difference is inflationary times.