Sunday, December 6, 2015
|2015.12.04 Gold Cycle Model Chart|
The gold cycle model suggests robust pressure for higher prices in the index going forwards. In fact, it suggests we may be at the cusp of a secular rise in gold prices, if the model is correct. The model has plenty of error, and the phase extension over the past few months has been disappointing because we are approaching the point where further divergences will likely not be tolerated by the model structure, and the result will be non-convergence on a model run. The model has reached these high levels of divergence on only four other occasions since 1968. A friend of mine who has a full time job in the commodity markets tells me that the gold COT figures are quite astounding in terms of the number of speculator short positions at the present time. Historically these extreme positions by speculators always resolve to the upside. Remembering that all models are wrong but some are useful, a short position in gold at this time would seem to be, on a historical cycle basis, a very very risky trade. All previous iterations of the model can be found on the blog.