$CDW:$Gold Weekly

The weekly $CAD gold price is showing a very simple plain vanilla-type correction, but in $U.S. terms, the volatility smile stands out.

I was looking at a previous post and realized that I had some of my number entered incorrectly as regards a possible out come in elliot wave terms for the gold price.

Wave One extension: 1033.90/253.20 = 4.08333333

Wave three: 1923.70/681 = 2.8237885...

Wave five: .618 X 4.0833333 = 2.52349794

Result: 2.52.... X 1179.40 = $2.976.21/oz U.S.

Wave five should be the smallest wave, and .618X the wave one extension. So this is all correct. It's not yet an established fact that gold prices will advance to this level, but it will likely fit with the elliot wave paradigm.

The time period of wave three should be 2.25 years, half the previous up-wave + correction 4.5 years, which was half the wave-one extension + correction, which was 9 years in total. The wave 2 correction was 32 weeks, while the wave 4 correction lasted 105 weeks.

My guess would be that gold prices may see a rapid run-up, then a grinding sideways bridge consolidation after a correction.

If a mania in gold occurs, and this is not at all exactly clear, then the ensuing correction will wipe out a lot of gold investors. A gold mine will have give you the average gold price through that time. Oil prices were in a mania until 2008, and have rebounded sharply since the correction, but it's not at all clear that Canadian oil producers managed to benefit for their shareholders, because they were much better at mining investors' pockets than producing a return. But this is also a sign of a drastic loss of purchasing power.

Free cash flow over costs and dividends are going to be the issue.

In Canadian dollar terms, if the loonie drops as the Australian dollar has, then $CAD/oz. will be higher than the U.S. dollar price. Should the U.S. dollar collapse, which might be the result of a currency crisis, say to half its value, then the U.S. dollar price will be much higher, but as a result of a further loss of purchasing power.

http://scharts.co/17HxjtG

-F6