Precious Metals Market Timing
The 5-year syndrome
Jul 9, 2005
"Time is more important
than price; when time is up price will reverse." -W.D.
W.D.Gann left us some wonderful
research and information. His cycle work, based on how Humans
function in the various markets thru time, is truly a simple
but magnificent gift. He called the 30- and 60-year cycles the
Master cycles. They are the most important for our purposes.
He also gave us this information
which is quite significant for this year, 2005.
"The years ending in
the number 5 are the years of ascension."
I checked on this and every
year ending in the number 5 has been an up year for the Dow Jones
Industrial Average since 1895. Some were big up years and some
barely made it. I can not adequately describe how much this information
has been ridiculed. It seems the "intellectual elite"
consider this asinine and stupid. I have read many essays and
opinions as to why the stock market will collapse this year.
For some strange reason it's not doing it. Maybe I should lay
"5" to 1 odds that the market won't collapse. This
sounds like a good bet but in spite of the overwhelming evidence
I'd rather watch and concentrate on the precious metals complex.
So be it. Even I wonder," Can it really be true?"
The 30-year T Bond Yield is
clearly following Gann's 60-year Master cycle. I have not heard
or read about any analyst, economic expert or Government official
mentioning this fact. I have heard and read a great deal
about the fundamental reasoning for interest rates doing what
they are doing. The conclusion by Alan Greenspan is that we are
experiencing a "conundrum". Well, conundrum and cycle
both begin with a "c" so I guess for government work
that's close enough.
I have mentioned many times
that Gold, Silver and the precious metal shares appear to be
following the W.D.Gann 30-year Master cycle. This fact has received
as much acclaim as the Years ending in "5" in the stock
market are the year of "ascension". As for Gold it
consistently trades in a manner that I would describe as honest
which is contrary to what folks complaining about "manipulation"
Delta turning points, Gann's work and long term wave counting
are three mighty powerful tools. Oh yes one more ingredient,
Patience. This is not a special report. It's just a few rambling
thoughts. Next report will be sent this weekend.
This 60-year interest rate cycle report was submitted and sent
to subscribers on January 24, 2005.
The 60-year Interest Rate Cycle
The chart above clearly demonstrates
that there is a 60-year cycle influencing interest rates. Interest
rates bottomed in 1946, and we may be headed for a bottom in
2006 to complete this cycle. It took approximately 12 years for
interest rates to double from the 2 % level in 1946. It is difficult
to guess how fast and how big a rise we might have this time
around. During the early part of the last cycle that began in
1946, the Dollar was convertible into Gold for foreign nations.
That no longer is true and we can't be certain that those nations
whose currency is backed by the U.S. Dollar will remain willing
to maintain those reserves in the Dollar. They may decide to
diversify their holdings and sell some or all of their U.S. Dollar
holdings. This would most likely precipitate the U. S. Dollar
decline or collapse that is being discussed and written about
by a number of folks in the financial community. Warren Buffett
is a well known U.S. Dollar bear and has confirmed that he has
diversified out of U.S. Dollars into various foreign currencies.
Back in the late 1970's, Paul
Volcker, the then Federal Reserve Board Chairman, did the only
thing he could to stop a Dollar collapse and skyrocketing Gold
price. He forced long term interest rates on U.S. paper up to
the 15-3/4 % level. Short term rates rose to a very high level
as well. His approach worked and Gold collapsed and the Dollar
recovered. Without Gold backing for the Dollar, at least for
foreign central banks, the same tactic may be the only way to
prevent or shorten a Dollar collapse and skyrocketing Gold price.
So, once the cycle bottoms we cannot depend on interest rates
rising slowly. This highlights the need to maintain a core position
in Gold items. The bottom of this interest rate cycle may be
a signal to make sure you are positioned in Gold items. It may
be a good timing device. However, it appears that we may have
another year, plus or minus a few months, to enjoy a rising stock
market fueled by further interest rate declines. I strongly suspect
that this will be the fuel to once again keep the much laughed
at "5" year syndrome for the stock market alive and
well. Ever since 1885 every year ending in 5 has been an up year.
Some squeaked thru and some rose substantially. The year 1895
barely made it as President Cleveland seemed to threaten War
against England. War against England is like threatening your
Mother! Twice was enough. Three strikes and you're out. Fortunately
it never happened.
There are further war threats
being talked about today so this year may be one of those "squeakers".
A market cycle is not magic. It is people and institutions run
by people functioning with their money, thru time, in response
to the economic environment in a manner that is called cyclical.
It can be observed and it can be used as a valid indicator of
the future cost of money. All one needs to see the progress of
the interest rate cycle is a long term chart of the U.S. 30-year
T-Bond yield. The chart I have provided gives a clear long term
are available at:
Disclaimer: The contents of this
letter represent the opinions of Ronald L. Rosen and Alistair
Gilbert. Nothing contained herein is intended as investment
advice or recommendations for specific investment decisions, and
you should not rely on it as such. Ronald L. Rosen and Alistair
Gilbert are not registered investment advisors. Information and
analysis above are derived from sources and using methods believed
to be reliable, but Ronald L. Rosen and Alistair Gilbert cannot
accept responsibility for any trading losses you may incur as
a result of your reliance on this analysis and will not be held
liable for the consequence of reliance upon any opinion or statement
contained herein or any omission. Individuals should consult with
their broker and personal financial advisors before engaging in
any trading activities. Do your own due diligence regarding personal
The Delta Story
Tee charts reproduced
courtesy of The Delta Society International.