More thoughts on gold and miners.

In my previous post on GLD I mentioned that much of the world thinks that gold is now in either E of 4 of A or 1 of 5 of A.  The expectation is for a gold sell off down to $1000 or $1100, a rally to $1300 and then a final crushing blow down to $600-$700 before starting a new bull market.  This is in fact currently my primary view.

But prudence demands that we look at things from multiple angles in order to not get too caught up in our own bullshit such that we miss the forest for the trees.  In other words, when too many people agree on the same thing, look for ways that herd think might be fooling us.

The charts of DRD and PAAS look like they have 5 large waves down.  They are not in some kind of a-b-c thing IMO.  DRD seems especially clear in this regard.  So how is gold going to go down to $1000 if DRD's waves have already put in a valid bottom?  It's bothering me.  Also, look at the chart of Newmont mining, a major player.  It does not go back far enough in order for me to see the full picture but from what I see it looks like the chart shows the tip of 1 then the pullback into 2, a strong 3, a deep 3 wave retracement into 4 an then a clear 5 wave movement into 5.

Since the peak we have seen an ending diagonal that took us back to the level of what appears from the limited data we have to be the prior 4th.  A lower low would clearly negate this view but for now, what if they gave a 5th wave selloff in gold and nobody showed up??  What if the bottom for gold is already in?   It sure would surprise a lot of cock-sure market technicians that I know of. 

That pullback in NEM to the prior 4th is mos def something to watch.  It jibes with the signals being thrown off by DRD and PAAS.  Far be it from me to disagree with EWI but if gold goes down to $1000 then we know from DRD's earnings report that it will be 30% lower than the cost of their production.  Bigger players can have lower "all in" costs than small little DRD but if you can't make money by that kind of margin, something is wrong with the price of what you are selling.  What would happen to NEM's chart if a 5th wave down in gold took it to $1000?  And then later on, what would it look like with gold at $700?  It could certainly happen but with all governments in trouble right now we have to realize that all paper money is worthless and it has been since 1971.  What happens if there is some global crisis which is not money printing but rather some major political issue, etc.  Paper money hyperinflates not because of too much printing per se but because of loss of confidence in the printer to hold the interest of its Marks and Patsies.

Below is the weekly and this is still log scale.  That is a clear ending diagonal: 5 rail bumps down, a breakout and back test of the top rail, and now trying to figure out what to do next.  A lower low will mean 5 clear waves down and that EWI model is correct.  A big a-b-c rally would follow those 5 waves but then it would ultimately collapse to a lower low.

This will be very interesting to watch as it plays out.