Gold Cycle

Gold Cycle is a term we use in long term analysis when we predict for upcoming years not months. Usually yellow metal is strong when businesses are down as investor look to park their money in better asset and Precious metals are their favorites commodities to park their money. When economies are doing good and businesses are thriving then yellow metal price tend to trend softer.

This normal gold cycle is just a term we use in analysis but it doesn’t mean every time if market falls then metals has to rise and every time metals has to fall when stock market crashes. Gold may behave differently in different market cycles. There are many factors to determine commodities pricing.

When US economy started heating up in mid 2007, gold prices started its upward journey as shown in chart. Yellow metal was trading in odd 600$ range. When final recession started in 2008 it made high of 929$. Almost 50$ gains within six months. Bullion did not stop there. Concerns about US market kept coming and precious metals started their bull run from there. In September 2011 investor’s favorite haven tested lifetime high of 1921$.

gold cycle

After September 2011, US economy started recovering and gold prices started its another bear cycle since then. Investor’s favorite save haven commodity have crashed almost 50% from peak of September 2011. This crash indicates another bear gold cycle. Watch chart below how did we crash since September 2011.

gold cycle

Dow Jones Index Average was trading at 11000 when xauusd made high of 1921$. DJIA is trading at 25000 now. So US economy’s major indicator is trading at double since then. Watch the chart below. Dow Jones started its bull cycle since Septmber 2011 and Gold cycle entered in bear zone.

gold cycle 3

More on Gold Cycle

Cycles or theories exist since ancient times. Sometime we refer them as a pattern. Cycle or Patterns are where something regularly repeat itself. Some believe every thing happens in a pattern. We have weather cycle of Summer, Winter, Rain. We have day-night cycle. So even in capital, commodities, forex markets we have patterns and cycles. Dollar Index was trading at 75 when recession came in 2008. It was already in free fall mode before recession, it was a great signal to determine how fragile capital markets are.

Major problem with Gold Cycle or Capital Markets Cycles are they don’t simply say sell or buy. Usually these are just indication to take precautions. I personally don’t follow gold cycle as i believe technical and other fundamental reasons are enough to spot a good buy or sell.

Just like now, We are trading near 1200$ and Equity markets are trading at lifetime high. Its really good time to buy precious metals. But main problem with retail traders they don’t follow stop loss. Its really essential to use stop loss in every trade to become successful trader. I will cover this buy sell scenario in my other post.

Hope I have clear this much awaited topic of Gold cycle today.

Happy Trading

Mohammad Arafat

By marafat