Avi's golden soap box [HUI]

Avi released an article today on Marketwatch that is worth reading IMO.  It calls for gold to hit $25,000 over the next decade.  When people make these calls based supposed fundamentals, I just laugh but when someone who is good at EW like Avi says it, I pay attention.  Lots of very smart, very well informed metals experts have made similar claims over and over again, all the while watching gold go down and cursing the manipulators for their bad luck.

Now don't get me wrong.  There are manipulators and they are able to control the price of whatever they are manipulating but I see this a as normal part of the operation of the herd, not as something special or unique.  They are not really changing anything, they are simply distorting it for a period of time.  At some point their efforts, which are invariable based on the use of debt, fail to provide positive return on their manipulations.  It's no  different than the credit game.  The games work until they don't and then the manipulations come undone and the market rights all the wrongs.

This is why the EW principle is so important to anyone who is trying to beat the next guy out of his hard earned money in the con game know as the stock markets.  And make no mistake, that is all that is happening.  No new value is being generated to ensure that all market participants can win.  Most will lose because they have to lose otherwise the math doesn't work.  The market is not a value generation system.  It is a value transferal system and the direction of transfer is from those who get it and who have a system for playing to those who don't and who play the game by gut feel.

In any case  I have been watching Avi's "GLD $95-$105" target for some time now and when the GLD chart failed to turn motive like it should have if EWI were going to be correct, I began to strongly suspect Avi's count was right.  Besides, the gold industry would completely collapse at gold $750 like Prechter believes will happen and I just don't think that this is in the cards.  GDXJ is down more than 80% from its peak already.

Of course, give 5 different people an EW chart and you can get 5 different readings; some interpretation is always required.  If this were not the case everyone would be perfect at it.  In addition, the future count of an EW chart can change dramatically based on a relatively small near term extension or failure to extend. This is why long term predictions are all well and nice but I like to pay attention to the near term details.  After all, drive for show, putt for dough.

The near term HUI chart suggests that an important test is about to occur soon.   If HUI cannot hold that line then the market could interpret it a a H+S break down with a breakdown target of $100.  This would be right in Avi's "$100-$125" wheel house for a HUI bottom.   From there he expects a 50 year bull market that takes it to $15000.  Of course, what he is really predicting there is massive inflation...  Expect a gallon of milk to cost $15 dollar by then as well. 

In any case, 50 years is a long time.  Perhaps a closer-in target to look for is his HUI chart's $375 level in 2020, a 3.75x gain from his projected bottom.  Not a bad move for 5 years.  The corresponding level for GDXJ would be ~$100 and if we assume that happens from a low of $18 then it would be a 5 bagger.  Again, not bad for a buy and hold...