What Happened To Gold?

March 1, 2012

Dear CIGAs,

What happened to gold on 29 February 2012? The precious metal dropped from $1792 to a low of $1686 in one day!

How does this shape up with our Elliott Wave expectations?

The answer is that the market is tracking well in line with expectations. Before dealing with the current move, it is an idea to go over what our expectations are. What we know so far is that Intermediate Wave III started at $1523 and that we have a target of $4,500 for the end of Wave III. We also know that Wave III will consist of five regular waves which we will label 1 2 3 4 and 5. Regular waves 2 and 4 will be the anticipated 13% downward corrections described in my speech to the Sydney Gold Symposium. Link at: Keynote Speech At Sydney Gold Symposium: November 2011

Regular wave 1 will consist of 5 minor waves which we label (i) (ii) (iii) (iv) and (v). Waves (ii) and (iv) will be downward corrective waves one degree small than the regular waves. Thus they should be about half the magnitude of the 13% of the regular sized declines, say about 6%.

Minor wave (i) should consist of five minuette waves which we can label i ii iii iv and v. Again the minuette waves ii and iv will be downward corrective waves about half the size of the minor wave corrections of 6%. Thus the minuette corrections should be approximately 3%.

The following is the analysis of minor wave (i) showing the five minuette waves:

i 1523 to 1665 +142 +9%
ii 1665 to 1620 45 -2.7%
iii 1620 to 1765 +145 +9%
iv 1765 to 1706 59 -3.3%
v 1706 to 1792 + 86 +5%
(i) 1523 to 1792 +269 +17.7%

The two corrective waves are approximately 3% as expected. Waves i and iii are equal at 9% while wave v is almost exactly 61.8% of waves i and iii. This wave count is as perfect as one could wish for. Thus we can conclude that minor wave (i) was completed at $1792.

As described above, minor wave (ii) should be a correction of approximately 6%, but could range from 5% to 8%. A decline of 6% from the $1792 peak gives a target of $1685. In after hours trading yesterday gold reached $1686.
The Comex chart, however, shows a low point of $1696.

It is possible that the entire correction in minor wave (ii) occurred in one day. A rally followed by a further decline to test the $1685 area is a more likely outcome. An 8% decline would bring the $1650 area into play. If gold drops below this level we will have to consider other possibilities.

Once the bottom of minor wave (ii) is in place in a convincing fashion it will be possible to make some more accurate longer term gold price forecasts.

Alf Field
1 March 2012
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New Elliot Wave Silver Discovery

By Alf Field

I have received numerous emails asking about silver. This article was prompted by a question enquiring what the silver price might be if my gold forecast of $4,500 proved to be correct. The question caused me to take a closer look at silver.

The reason why I have written very little about silver in the past was because the beautiful Elliott Wave (EW) symmetry and predictable relationships visible in gold were not to be found in silver. This article reveals a new EW discovery that proves that EW is alive and well and living in silver.

I first wrote about silver in December 2003 in an article titled “US Dollar Implosion Part II”. The link to this article is at: US Dollar Implosion – Part II. The brief piece on silver was tacked onto the end of that article. In view of its brevity, the 2003 silver piece is reproduced in full below:

Quote:

SILVER

“In past crises, the wealthy protected themselves by purchasing gold and gold related assets. Ordinary people, by far the greater number, could rarely afford to buy gold. Being far cheaper, they previously had to buy silver. This metal became the poor man’s choice as an asset to protect their savings. Silver has so far lagged gold in the early stages of this bull market, but that situation seems about to change.”

“Throughout recorded history the average relationship between silver and gold has been 15oz silver to 1oz gold. The ratio at present is a far higher 75:1 ($400/$5.30). This is massively out of line. If gold were to double to $800 per oz, it would not be unreasonable to expect the silver/gold ratio to decline sharply, possibly as low as 40:1. With gold at $800, this would position silver at $20.

Thus a 100% increase in the price of gold could possibly be accompanied by a simultaneous 400% increase (perhaps more) in the price of silver. This offers significant opportunities both in silver bullion and silver mining shares.

The above graph of the price of silver has been borrowed from an excellent recent article by Dan Norcini entitled “A Technical Look at Silver Update”.

What is quite clear from the graph is that silver’s 22-year bear market down trend has come to an end. As Dan Norcini says, a new bull market in silver has been born. It is difficult to argue against this contention and I have no intention of doing so. A silver price above $6.80 would complete a fabulous head-and-shoulders base formation. With this as a foundation, it would be possible to project a very large rise in the price of silver for the future.” end of the December 2003 quotation.

Silver did reach $20.68 in March 2008 at the same time that gold peaked at $1003. The silver to gold ratio was thus 48.5 in March 2008. The lowest this ratio has reached SINCE 2001 is about 32, achieved at the end of April 2011 when gold was around $1570 and silver peaked in the $49 area. At that point gold had experienced a 6-fold increase from its bull market starting point of $255 while the silver price rose 12-fold from its starting point of $4 in November 2001.

The quick answer to the question of what the silver price will be when gold gets to $4,500 is to pick your favorite silver/gold ratio and divide it into $4500. The current ratio incidentally is about 51. If you choose the lowest ratio achieved since 2001 of 32 that would produce a silver price of around $140 ($4500 divided by 32).

This is not a satisfactory answer, so I decided to approach the Elliott Wave analysis of silver from a different angle. Instead of working upwards using the analysis of the minor waves, which was the technique used in the gold calculations, what if we worked backwards in silver starting with the larger waves?

Gold and silver tend to move in tandem, not in an exact synchronization, but enough to suggest that the Major waves of both metals should coincide from a time perspective. We know that in gold the Major ONE wave peaked in March 2008 at $1003 and that Major TWO declined to $680 in November 2008.
Silver also had a peak in March 2008 at $20.68 and declined to an important low of $8.77 in November 2008. If we assumed that the peak at $20.68 in March 2008 was the end of Major ONE and the decline to $8.77 the end of Major TWO, how would the various percentages work out? When I did these calculations I was astonished at the relationships and wave counts that emerged.

The chart below is the monthly spot silver price shown in log scale so that the percentage changes are visible. The bull market started in November 2001 at a price of $4.02. From that point to the suggested peak of Major ONE at $20.68 there are five clear waves visible, marked 1-2-3-4-5. The prices at the various turning points are also displayed.

The analysis of the suggested Major ONE wave is set out in the body of the chart. The typical impulse wave relationships are immediately apparent. Both corrective waves 2 and 4 are similar (-33.7% and -35.9%). Whenever two corrective waves are similar it is a signal that they are part of the same larger wave structure. On its own, this fact would confirm that the 5 wave move from $4.02 to $20.68 was a complete wave of larger degree.

There is further corroborating evidence. Waves 1 and 5 are similar at +106% and +115%, a usual EW feature. Wave 3 should be the longest wave, and it is at +171%. In addition, if one multiplies the gain in wave 1 of +106% by 1.618 it produces 171.5%, exactly the gain in wave 3. These relationships are evidence that the rise from $4.02 to $20.68 is a completed impulse wave and that we can call it Major ONE.

Having completed this 5 wave up move, the next correction in Major TWO would be expected to be one degree larger than the two corrections of 33.7% and 35.9% in Major ONE. As shown on the chart, Major TWO declined from $20.68 to $8.77, a loss of -57.6%. The two corrections of 33.7% and 35.9% are close to the Fibonacci 34. The next higher number in the sequence is 55, close to the actual decline of 57.6% in major TWO. Incidentally, if we take the 35.9% decline and multiply it by 1.618, it gives a figure of 58%, very close to the actual decline of 57.6%.

These relationships suggest that silver has completed the same shaped bull market as gold has and that it is at the same stage in its development. Thus silver has probably also completed the first intermediate up wave of Major THREE, in this case from $8.77 to $49.52, a gain of +$40.75 or +464% and has also completed intermediate wave 2 of Major THREE, being the decline from $49.52 to $26.39 or -47%.

How does this decline of -47% measure up in terms of EW relationships? As with gold, where the corrections in Major THREE were shown to be larger than the corrections in Major ONE, the same applies to silver. The corrections in Major ONE shown in the chart above were close to -34%. If we multiply 34% by another Fibonacci relationship of 1.382 we get 47%!

This is mind-blowing stuff for an analyst who did not believe that EW applied to silver!

We can now attempt to make some price forecasts. Silver, as with gold, is starting intermediate wave 3 of Major THREE, which should be the longest and strongest wave in the bull market. It should certainly be longer than intermediate wave 1 which was the gain from $8.77 to $49.52, or +464%, as shown above.

Thus the gain in wave 3 of Major THREE should be larger than +464%. It should be a gain of at least 500%. Starting from the $26.39 low, a gain of 500% would produce a target price of $158.34 for silver. That is the number which equates with the $4500 price forecast for gold and produces a silver to gold ratio of 28.4 ($4500 divided by 158.34).

The gain in gold was forecast to be 200% for this move while the forecast rise in the silver price is 500%. Silver is again predicted to perform better than gold based on these EW calculations.

A word of caution is appropriate at this stage. All EW studies are based on probabilities. While the wave counts may provide a high degree of confidence in the forecasts, one cannot be 100% certain of any forecast. It is necessary to have a point at which it is obvious that the forecasts are wrong. In the case of this silver study, the line in the sand is at $26.00. If the silver price drops below $26.00 the odds are that the above calculations will not work out.

A further word of caution: silver is not for the faint hearted. Silver is considerably more volatile than gold and the corrections are much larger. Silver corrections can and do happen quickly. They are emotionally gut-wrenching and it is easy to get shaken out of one’s position near the bottom of a large correction.

Alf Field
1 February 2012
Comments to ajfield@attglobal.net

Keynote Speech At Sydney Gold Symposium: November 2011

My Dear Friends,

You know I have great respect for Alf Fields both as a master of his methods (there are very few) but also for having a mercantile sense which cannot be taught. You know of his accuracy during the two major bull markets for gold.

I fully agree with Alf on the potential of the next move. I feel confident the accordion chop that Kenny points out did complete itself on the day of the longest predicted period of consolidation.

I see gold headed into the $2000, but only as another steep on its way to Alf’s number.

Respectfully,
Jim Sinclair

The Skinny:

“Once this correction has been completed, Intermediate Wave III of Major THREE will be underway. This should be the largest and strongest wave in the entire gold bull market. The target for this wave should be around $4,500 with only two 13% corrections on the way.”

KEYNOTE SPEECH AT SYDNEY GOLD SYMPOSIUM 14-15 NOVEMBER 2011
BY ALF FIELD

THE MOSES PRINCIPLE

The Moses Principle is an irreverent theory based on the question of why Moses spent 40 years traversing the Sinai desert before leading the Israelites to the “promised land”.

God was powerful enough to send numerous plagues to devastate the Egyptian economy until Pharaoh allowed the Israelites to leave Egypt. Later God caused the Red Sea to part so that the Israelites crossed on a dry sea bed. When the pursuing Egyptian army and their chariots were in the sea bed, the waters crashed back and drowned them.

If God was powerful enough to do all of these things, why not allow the Israelites to go straight to the “promised land”? Why did Moses spend 40 years traversing the barren desert before leading the Israelites to the “promised land”? Here is the irreverent theory. Every Israelite over middle age when they left Egypt probably died during the ensuing 40 years. The younger people were born in the desert or spent their adult lives in the desert. After 40 years the life experience of the survivors consisted of living in the desert. When they finally got to the “promised land” it appeared to be “flowing with milk and honey” when compared to their prior desert existence.

A total generational change had taken place so that the survivors had no knowledge of anything other than the desert. There was nobody who could remember what Egypt was like. The Moses Principle recognizes the fact that over any 40 year period, a generational change takes place.

What has this got to do with gold? Recently we passed the 40th anniversary of 15 August 1971, the date when the last link between currencies and gold was ended by President Nixon. This launched an era of floating “I owe you nothing” currencies. Money was what any government deemed it to be, generally something that the government could create in unlimited quantities. That system, plus the fractional reserve banking system, launched an era of ever increasing debt and credit. It was an era where debt was desirable and money lost its purchasing power.

Everyone in this room has spent their adult lives living under this system. Most have had no exposure to monetary history or what money really is. The new “Moses” generation will have to re-learn the lessons of monetary history before the world can enter a new era of sound money and stable economic growth.

The impact of this generational change will be discussed later.

The 15 August 1971 was an important date for me personally. I had grown up in South Africa and in early 1970 started a funds management company with a good friend of mine. The first 18 months was a struggle as we were buffeted by a vicious bear market. By August 1971 our clients were largely in cash awaiting the end of the bear market or an inspirational idea.

That inspirational idea came on 15 August 1971 when I heard that President Nixon had decreed that the USA would no longer exchange US dollars held by foreign governments for gold at $35 per ounce. Gold had limited downside but appeared to have good potential for substantial gain. Gold shares were deeply depressed after 37 years of a fixed $35 gold price, another “Moses Principle” period. We bought gold shares aggressively. This proved to be an astute move and our funds management business was launched on a successful path.

Having locked ourselves into a big position in gold shares, we needed to have some idea of how the gold price might perform and how high it might rise. We ran into the conundrum that has confounded fundamental analysts since 1971. How do you value something that has no utility value, no earnings or net asset value, does not spoil or corrode and is not used up?

Other commodities such as copper, soya beans and corn etc., are priced using a combination of demand, supply and stocks. If demand exceeds supply, stocks diminish, shortages develop, prices rise and new production comes on stream. Eventually supply exceeds demand, stocks build up, prices decline and marginal producers go out of business. The cycle then repeats itself. Other commodities are produced for consumption while gold is accumulated.

Consequently large stocks of gold exist in official hands as central bank reserves. There are also large stocks of gold in private ownership, in vaults around the world, in homes, buried in gardens, in coins and gold jewelry. New mine production of gold is tiny compared to available stocks. In 1971 official holdings of gold were about 37,000t. Cumulative world gold production throughout history up to 1971 was estimated to be about 90,000t, so investors/hoarders must have owned at least as much as the official holdings.
In 1971 world gold production was a mere 1,450t, or less than 2% of the
estimated amount of gold held in the world at that time.

The fundamental conclusion was that the owners of the large stocks of gold would determine the future of the gold price. If they became net sellers, the gold price would decline. If they became net buyers, the gold price would rise.
There were reasons to believe that they would be net buyers. The world had been launched into an untried experiment where all countries were subject to Government fiat currencies and, in addition, there was a latent group of buyers in the wings. Americans had been prevented by law from holding gold since 1933. With the collapse of the gold exchange standard on 15 August 1971, there was no reason for this prohibition to continue. On 31 December 1974 (another Moses generation period from 1933) the largest and wealthiest nation on Earth allowed its citizens to buy and own gold.

The obvious conclusion was that it was necessary to resort to technical analysis to find a way to predict movements in the gold price. I experimented with a variety of technical systems and then got lucky. I discovered that the Elliott Wave Theory (EW) gave superb results in predicting the gold price. I couldn’t get the same great results using EW in other commodities or markets. EW is a complicated system with many difficult rules, but I will try and explain it in simple terms.

The technique is to concentrate on the corrections. In terms of EW, the sequence in a bull market is as follows. The market rises, has a 4% correction, rises, has a 4% correction and rises again. At this point the next correction jumps from 4% to a larger degree of magnitude, say 8%. The market then repeats the sequence. A rise, a 4% correction, a rise, 4% correction, a rise and another 8% correction. When the market is eventually due a third 8% correction, the magnitude of that correction jumps from 8% to 16%. This sequence is repeated until two 16% corrections have occurred when the size of the next big correction jumps to 32%.

The beauty of EW is that the corrections in gold are remarkably regular and consistent. Early in 2002 I picked up the 4%, 4%, 8% rhythm in the gold market which convinced me that a new bull market had started in gold. Another feature of EW is that once one is confident that these percentages have been established and one has some idea of the approximate size of the up moves, simple arithmetic allows one to calculate a forecast of the future price trend.
Using this method I calculated that the gold price should rise from the $300 ruling in 2002 to at least $750 without having anything worse than two 16% corrections on the way. That was valuable information at that time.

Furthermore, from the $750 target a big 32% correction could be expected to about $500. Then the bull market would resume, rising to perhaps $2,500 before another 32% correction occurred. The final up-move would take the gold price to much higher levels, possibly $6,000. Once again, a valuable insight when gold was $300 in 2002.

The gold price actually got to a shade over $1000 in March 2008, a four-fold increase instead of the expected three-fold rise to $750. That was the point at which the 32% correction was due. Over the next seven months the gold price in the spot market declined from $1003 to $680, an exact 32% correction. Using PM gold fixings, the numbers were slightly different. The high was $1011.0 and the low $712.5, making the correction slightly less than 30%, but quite adequate.

The above chart depicts the monthly spot gold prices since the start of the gold bull market in April 2001 when gold was $255. The 32% correction in terms of spot gold is clearly shown. The high at $1003 and the low at $680 established the extremities of the first two major waves of the bull market, shown in the chart as Major ONE and Major TWO. The gold bull market is in the process of working its way upward through Major THREE, often the longest and strongest wave in the bull market. There have been a number of interesting and unusual developments in Major THREE which will be discussed later.

I would like digress at this point to share with you the reasons why I started writing articles on Gold, EW and monetary history. The reason I am standing here today is the direct result of writing those two series of articles published on internet web sites. I am a self-funded retired person managing my own investments. Unlike most people posting articles on the web, I was not trying to sell subscriptions to a newsletter or get people to buy something. Nor was I writing to big note myself. So if I was not after fame, glory or riches, what was my motivation? The following two stories will explain where I was coming from.

These stories are intensely personal. Even close friends and relatives have not heard these stories. They are not meant to infer any self-aggrandizement nor are they an attempt to alter anyone’s personal views. The two stories are linked and relate eventually to gold. Together they are the reason why I wrote the articles posted on the web.

The first story starts with an awful event where my son Richard was attacked by a lion. He and his fiancée Rebecca were managing a game lodge in northern Botswana. He took a couple of guests out on an early morning game drive.
They followed the tracks of a lioness and three cubs down a dry river bed but lost the trail. When Richard got out of the vehicle to find lion tracks, the lioness launched herself at him from nearby shrubs. The lioness landed with her paws on his shoulders, dislocating one shoulder and driving him to his knees. She then whacked his head with her paws, virtually scalping him and nearly ripping his ear off. She then bit him on the back of the neck. Any person or animal subject to such an attack would almost certainly be dead.

Richard survived this vicious attack as a result of a series of miracles. The first miracle was that the bite on the back of his head had missed the vital arteries, missed the spinal column and had not penetrated the skull. If the lioness’ bite had been fractionally deeper, higher, lower or sideways, that would have been the end for Richard.

(In the speech, I skip to the story of the beggar’s sign. You can do likewise.)

The second miracle was that the couple in the vehicle reacted instantly. The wife yelled at the husband to get into the driver’s seat and drive at the lion, blowing the horn and making a noise. This caused the lioness to back off. Richard was still conscious and managed to get himself into the vehicle. He was able to work the radio to warn Rebecca of what had happened.

The third miracle was that a couple of weeks prior to this event the local team of paramedics had visited the safari lodge to give the staff a lesson on what to do in the event of a lion attack. Rebecca remembered everything that they had said. She reacted with astonishing calm. She assessed the wounds, called the paramedics by radio, got what she needed from the First Aid cabinet and then stayed with Richard staunching the blood flows until the paramedics arrived.

The fourth miracle was that after being flown to hospital in Gaberones, the capital of Botswana, Richard was allocated a doctor who fully understood how to treat lion injuries. He knew that he could not stitch Richard’s head for several days due to the threat of infection. Lions do not use Colgate’s tooth paste! Richard was given a full anesthetic on four consecutive days while the doctor cut away the portions that were infected.

Richard required very large amounts of blood. The paramedics had warned Rebecca that she should ensure that Richard was only given blood which was certified HIV negative. There was blood available but none of it came with the necessary certificate. How the vital blood was obtained was another miracle, but that story is too long to discuss now.

When the stitches were removed from Richard’s skull, he was still left with a gaping wound at the back of his head. A skin graft from his thigh to the back of his head was required. A visiting plastic surgeon was able to do the necessary graft, but Richard had to later fly to Johannesburg for the surgeon to check that the graft had “taken” and to have the stitches removed.

(Story of the Beggar’s Sign begins here.)

When we visited the surgeon he pronounced that the graft had “taken” and that Richard was absolutely OK. All he needed was rest and recuperation to be as good as new. Any parent who has lost a child will understand the anguish and pain that we endured going through this episode. Now our son, brother, and fiancée, whom we thought we were going to lose, had been saved and returned to us.

At last we could relax. Nothing could go wrong now. You can imagine the joy and jubilation in the car as we drove away from the surgeon’s rooms. Then I saw a beggar at a traffic light. He was carrying a cardboard sign which read:

“No Money. No Food. Please Help Me. God Bless”.

Impulsively I decided that I wanted to buy his sign and hang it on my wall as a memento of this happy day. I had 200 Rand in my wallet, probably more than he made in a month of begging. I called him over, showed him the money and said that I wanted to buy his sign for R200. He simply said “No!” The lights turned green and people were honking behind me, so I gave the R200 to the beggar and drove on, leaving the beggar with his sign.

After dropping Richard and Rebecca with friends I passed the same intersection on the way to my lodgings. The beggar was still there and I was now more determined than ever to buy his sign. I called him over to the car. “I gave you R200 an hour ago, do you remember?” He said that he remembered, clutching his sign protectively to his chest.

“I want to buy your sign for a special reason. Just tell me how much you want for the sign and I will go to the nearest ATM and get the money.”

He shook his head and again said “No”, clutching his sign possessively to his chest. “It will only take you five minutes to make another one” I said, but that elicited another vehement “No” from him. The lights had changed and once again people were honking at me. “If you will not sell me your sign, at least tell me why you won’t sell it.” He replied “God gave me this sign!” I drove off with the words “God gave me this sign” reverberating through my brain.

I am an accountant and investment analyst by training. I am used to digging out facts, checking them and drawing conclusions from them. I am skilled at calculating odds and probabilities. The odds of Richard surviving such a terrible lion attack were off the charts. The odds of finding the only beggar in the world who would not sell his sign for any price were also astronomical.

I had always felt that I was in control of my life. I make the decisions and do things my way. Richard’s recovery from the lion attack was a situation over which I had no control and when I did try and take control of something and buy the beggar’s sign, I had been rudely rebuffed. The only logical conclusion was that God was giving me a sign that He was in control, not me. It was the most humbling moment of my life. Faith is a gift, but it seems that some people have to be bashed over the head in order to accept that gift.

This unusual story needed to be told in order to fully understand the second strange story that does deal with gold. The link came through the Priest in the London parish where we lived for a few years. He had been asked to request prayers for Richard’s recovery and as a result we got to know him quite well. He is a cricket fanatic. When I heard that he planned to visit Australia to watch the cricket series between Australia and England in late 2002 and early 2003, I invited him to stay with us at our house on the northern beaches for a couple of days after the Sydney cricket test in January 2003.

In due course I picked him up from the city. It is about an hour’s drive to our house, so we had plenty of time to chat. He wanted to know if I had done anything special over the past year. I responded that I had made a dramatic change in our family investments during the year, putting some 40% of our capital into gold, silver and mining shares. He was clearly interested and wanted to know why I had done this. I said that I could see a number of problems developing, especially in America, that would eventually result in a major financial crisis which would threaten to bring down the entire world money and banking system. The authorities would create vast new sums of money in an attempt to prevent this melt-down from happening, resulting ultimately in the destruction of paper currencies. This would require the establishment of a new monetary system and I expected gold to be a major part of the new monetary system.

He then asked a strange question: “How high do you think that the gold price can go?” I tried to dodge the question as I did not want to explain Elliott Waves to him, so I just said that gold would probably rise to extraordinary heights. I explained that the extent of the gold price rise depended on the quantity of new money created to ward off the anticipated crisis. He persisted, wanting to know what “extraordinary heights” meant. He obviously wanted a fixed number.

To mollify him I said that in the 1970’s bull market gold had increased 25-fold from $35 to over $850. If the new gold bull market was of the same order, then starting from a base of $255, the current bull market could reach somewhere over $6,000 per ounce. He then wanted to know what the current gold price was. When I said it was about $300, he seemed satisfied.

The next morning the two of us went for a jog on the beach. He asked if I believed in prophecy. I said that I had not really thought about it. Given that there were prophets in the Old Testament who seemed to have the word of God and in the New Testament there were people who had the gift of prophecy, well yes, I guess that I probably had to believe in prophecy.

He then told me this remarkable story. In his London Parish there was a lady who did have the gift of prophecy. She had received several prophecies that had related to him which proved to be accurate. As a result he was convinced that she had the true gift of prophecy. There was an occasion when this lady received an unusual prophecy, quite different to anything she had previously experienced. She thought that if the Parish Priest telephoned her, she would know that she had to tell him about it. Indeed he did telephone, so she told him that she had received this very strange prophecy. She had been instructed to write it down and mail it to him. He was to keep it unopened until she called to let him know that it was time to open the envelope.

A few days before he was scheduled to fly to Australia she telephoned him to say that it was time to open the envelope. The prophecy consisted of just one line which read: “The price of gold will rise to extraordinary heights!”
These were the exact words that I had used the previous day in our conversation in the car. He concluded that this prophecy was meant for me!
I was quite shocked, gob-smacked actually. I would normally have shrugged it off as an interesting story and forgotten about it. After the lion episode and my experience with the beggar, I was more inclined to take it seriously. What did it mean? There was nothing new in it for me, other than being a confirmation from a very strange source that my views were correct.

I felt that there must be a deeper reason for receiving such a strange message. I concluded, somewhat reluctantly, that if I had been given the talent and knowledge to see such a dramatic financial crisis coming down the track, then surely I had a responsibility to warn people about it?

The crisis that was coming had the potential to be the biggest event in the lives of the current generation. It was likely to become the most important factor governing investment decisions when the crisis arrived. So I started trying to alert people to the serious financial and monetary crisis that I could see coming and warn them to buy precious metals as protection.

Talking to friends and fund managers about my views, I ran head first into the Moses Principle. The new generation had not received an education on monetary history, nor what qualities money should have. I was met with glazed eyes and body language that showed no interest in what I was saying. I was talking in many instances to the “new rich” generation. They were the bankers, investment managers, stockbrokers, hedge fund managers and others who were massaging the vast sums of money and credit that had been created since 1971. They were taking their percentage of the funds that flowed through their businesses and were doing very nicely. They didn’t want to listen to a grey-haired old fogey spruiking a coming crisis that was going to wreck the gravy train that they were living off. Clearly this method was a failure.

The solution was to publish articles on internet web sites to get my message across. I had to proceed slowly and cautiously, only giving information that people could accept at that time. It was April 2005 before I felt confident that I could write an article titled “The Seven D’s of the Developing Disaster” about the problems that I could see developing, all starting with the letter D, debt, deficits (budget and trade), the US dollar itself, demographics (baby boomer unfunded entitlements), derivatives, dwellings, deflation (including deleveraging) and destruction, being the long running wars in Iraq and Afghanistan. This article is located at:

The Seven D’s of The Developing Disaster

When the financial crisis eventually arrived in 2007, it was sparked by derivatives (credit default obligations CDO’s) and events in the real estate market (dwellings). The arrival of the crisis allowed me to write more aggressively. By late 2008 there was a much greater awareness of the problems and I felt that I could leave it to others to deal with the ongoing consequences.

In August 2003, in parallel with the money/economic articles, I started forecasting the gold price using the Elliott Wave system. Here too I had to proceed slowly. I felt that I could not reveal my longer term forecast for the gold price because it was so bullish that I would be branded as a nut case. When I wrote my final Elliott Wave article in November 2008 I did reveal the full picture, showing that there was a possibility that gold could reach the extraordinary heights of $10,000. At that time gold was in the $750 area. That article can be found at:

Elliot Wave Gold Update 23

IMPACT OF THE MOSES PRINCIPLE.

It is now time to return to the Moses Principle and its impact on the gold price. Perhaps the most important point is that the modern Moses generation has had very little exposure to monetary history. They do not understand what has caused the current financial crisis. If one does not know what caused the current crisis, one cannot know how to go about fixing it. Central Bankers and Finance Ministers are also part of the Moses generational change. By the late 1990’s the new incumbents had experienced a 20 year bear market in gold and were influenced by Keynesian economics.

They didn’t understand why gold was held in their country’s foreign exchange reserves and resorted to the wholesale selling of this unnecessary “barbarous relic”. Famously Gordon Brown sold two-thirds of Britain’s gold stock near the bear market lows in 2001/2002. Australia sold a similar proportion of its gold. The European Central banks were selling gold but had a joint agreement to restrict their combined sales to 400t per annum. Even conservative Switzerland sold some of its gold reserves.

Originally it seemed that Central bankers were selling gold to protect the integrity and longevity of their paper currencies. Perhaps, with the generational change, they did not know any better. Perhaps it was just the “thing to do” at the time. Despite this central bank selling, the gold price went up! Buying by investors/hoarders had exceeded official selling and a new gold bull market was born. Central bank selling of gold gradually declined. Recently central banks under the leadership of Russia and Asian nations became net buyers of gold. The GFC has created a much greater awareness in official circles of the role that gold plays as a store of value asset in national reserves.

The distortions that have grown out of the 40 year period since 1971 have reached proportions that demand change. The problem is that the current generation does not understand that the root cause of the GFC is unsound money created at will by governments, combined with a banking system that has enabled the creation of an unsustainable mountain of debt. The modern generation is groping with the problem and gradually working towards understanding that the underlying cause of the crisis is monetary.

The modern generation will have to face some brutal truths as the world deals with the ongoing global financial crisis. The following are the brutal truths that apply to the USA and the world:

THE BRUTAL TRUTHS
The slate needs to be wiped clean and a new sound monetary system introduced.
That will require the elimination of all debt, deficits, unfunded social entitlements, the US Dollar as Reserve currency, and the big one, the $600 trillion of derivatives.
To eliminate these problems by default and deflation will cause a banking collapse and untold economic pain, leading to riots and political change.
Politicians are appointed for relatively short terms and opt for the easy solutions.
While politicians continue to have the ability to create new money at will, they will do so in order to prevent a melt down on their watch.
Consequently the odds point to governments wiping the slate clean by generating enough new money to eventually destroy their currencies.
The new international monetary system is likely to involve precious metals. It will have to be money that people trust and that governments cannot create at will.
This has happened many times before, dating back nearly 900 years to the first paper money introduced in China. History is full of attempts to use paper or fiat money, all of which ended in the destruction of that money. The last century saw virtually every South American country “wipe the slate clean” and begin again with a new money. Some did it several times. The Romans faced a similar financial crisis and resorted to reducing the silver content of the Denarius, eventually by about 95%, before people refused to accept the Roman coins.

There are two things that are different about the current episode. This is the first time in history that fiat or government issued currency has been in use in every country around the world at the same time. Secondly, we have an electronic money system which is very efficient. It enables new money to be created at a faster rate than ever before.

Every experiment with government issued fiat money has ended with the destruction of that money There is no reason to believe that it will be different this time. The world’s 40 year experiment with floating “I owe you nothing” fiat currencies is coming to an end.

I have come out of retirement for this one off, once only, speech to warn that the good ship “Life As We Know It” is sinking.

You have the choice of getting into a life boat now or going down with the ship. The life boats consist of precious metals and other assets that will survive the coming currency destruction.

It is likely that gold will be the new unit of measurement or standard of value against which the performance of other assets will be judged. The challenge will be to find assets that perform better than gold.

The forecast contained in the “Brutal Facts” segment is not a pleasant one. It is unfortunately the most likely outcome. All that we can do is to “be prepared”. It is vital for one’s personal financial survival to take action now.

In conclusion, I would like to mention that my son Richard is married to Rebecca and they have a 4 and a half year old daughter with another baby on the way. They live in Sydney and Richard works for a local company organizing tailor made safaris to Africa for small groups. If you have any interest in doing such a trip, you can contact him at:

rfield@epicprivatejourneys.com
Alf Field ajfield@attglobal.net
7 November 2011.

ADDENDUM: Update of the Elliott Wave Gold Analysis

I promised that I would reveal some interesting things about the EW moves in gold since the $681 low in October 2008. That low was the start of the Major THREE wave. In Major ONE I mentioned that the corrections were 4%, 8%, 16% and then 32%.

We know that Major THREE will likely be longer and stronger than the prior Major ONE up wave. It is logical to expect that the corrections in major THREE will be a larger percentage than those experienced in Major ONE. This is how the first Intermediate wave of Major THREE developed in terms of London PM Fixings:

Intermediate Wave I in London PM Fixings
Oct 08 to Feb 09 $712.5 to $989.0 + $276.5 +38.8%
Feb 09 to Apl 09 $989.0 to $870.5 -$118.5 -12.0%
Apl 09 to Dec 09 $870.5 to $1212.5 +$342.0 +39.3%
Dec 09 to Feb 10 $1212.5 to $1058.0 -$154.5 -12.7%
Feb 10 to Jun 2011 $1058.0 to $1549.0 +$491.0 +46.4%
These are typical of the beautifully consistent sizes of EW waves in gold. There are two up waves of about 39% and two corrections of about 12%. Several things can be determined from these numbers. In February 2010 it was possible to pencil in a target for wave 5 of $1470, being a 39% rise from the wave 4 low of $1058. The 12% corrections are larger than the 8% for the equivalent waves in Major ONE, which was expected. One can deduce that the correction to follow wave 5 will be one degree larger than 12%, possibly double this figure. The target for wave 5 of $1470 was exceeded mainly because this became an extended wave. It reached a high of $1549 for a gain of 46.4%. The chart below depicts these waves in London PM fixings:

Extended waves are simply waves that subdivide into an additional 5 waves. It happens mainly to 5th waves and generally makes life difficult for EW analysts. Difficult yes, but not impossible.. The analysis of the first extension, the extension of wave 5, is set out below:

Wave 5 of Intermediate Wave I based on London PM fixings.
(1) 1058 to 1261 +$203 +19.2%
(2) 1261 to 1157 -$104 8.2%
(3) 1157 to 1421 +$264 +22.8%
(4) 1421 to 1319 -$102 7.2%
(5) 1319 to 1549 +$230 +17.5%
Wave 5 1058 to 1549 +$491 +46.4%

NOTE: From the $1319 start of wave (5) above, the target price was $1319 + 19.2%, the same gain as wave (1), giving a target of $1572. The high price for gold in wave (5) in the spot market was $1576 on a day (2 May 2011) when the UK had a public holiday and there was no London PM fix available. Thus the gain for wave (5) was stunted in terms of PM fixes. This is not satisfactory and it became necessary to revert to analysing the waves in spot gold prices to getaccurate readings. This was also required in order to pick up the minor waves in the final two extensions which were explosive in nature.

To illustrate how to analyse gold using EW through this difficult period, it is best to work through the time line as it actually happened. As noted above, the expectation was that following the completion of the extended wave 5, a correction one degree larger than 12% would occur from the peak of wave (5) at $1576.

Gold had a minor correction to $1478 in the spot market and then started a sharp upward move. When gold went to a new high above $1576 the probability of the big 24% (give or take 3%) correction occurring at that time receded. The stronger probability was that a new 5th wave extension was underway. This was the first of the explosive series of extensions in gold. It became an historic sequence of four 5th wave extensions in declining orders of magnitude.

At the end of each extended wave, the spectre of the bigger correction (21% to 27%) came into focus. With each new high, the bigger correction was delayed and a new extended wave was born. At $1814, after three 5th wave extensions, the probability that $1814 was THE high was about 80%. Another extension at an even smaller degree was accorded only a 15% probability. The remaining 5% covered the possibility that the wave count was wrong and that a completely different outcome was evolving.

From $1814 gold had a minor correction to $1723, then blasted through $1814 to new all time high prices. The odds of a fourth 5th wave extension at the smallest degree changed from a meagre 15% to a 90% certainty. The wave count at this smallest degree helped to determine in real time that at a price over $1910 gold was in serious danger of an important top, with the bigger correction certain to follow.

Both charts updated to 7 October 2011 and illustrate the wave counts described.
We can now consider the possible magnitude of the current correction from the $1913 top. The correction will be one degree larger than the prior corrections, 12% in PM fixes and 14% in spot gold, an average of 13%. That compares with 8% in Major ONE. Both 8 and 13 are Fibonacci numbers, so it may be that the next correction could be 21%, the next Fibonacci number.

In Major ONE, the corrections tended to double when they moved up a degree in magnitude, so one must consider 26%, double 13%, as a possibility. A 21% correction from the peak of $1913 gives a target of $1511. A 26% correction would target $1416. There is one further possible target and that is $1478, the point at which the explosive extensions commenced. The price of an item will often retrace the full amount of the explosive extension. There was a recent example in silver of such a full retracement of the explosive extension, see the chart below:

This analysis was prepared on 27 September 2011, the day after spot silver reached a low price of $26.59. The start of the extension was at $26.50 on 28 January 2011. A mere 3 months later, at the end of April, silver topped at $49.50, a very obvious explosive advance. Silver then traced out an A-B-C correction where the A and C waves were declines of similar size at $17 each, a typical EW relationship. At that low point of $26.59 on 26 Sept 2011 the silver price had exactly retraced the full gain achieved in the explosive extension. The conclusion was that there was at least an 80% probability that the silver correction had bottomed at $26.59.

If gold retraces the exact gain achieved during the explosive advance from $1478 to $1913, which occurred in just seven weeks, it will represent a decline of 22.8%. That is nicely within the above anticipated range of 21% to 26% for the current decline in gold. There is a possibility that the spike drop to $1531 on 26 September marked the low point of the correction in gold. The midpoint of the correction from $1576 to $1478 is $1527, close to $1531. If $1531 was the low, it was a decline of 20%. This is slightly below expectations, but it still qualifies as one degree larger than 13%. At the date of writing (7 Nov 2011), gold has recovered to $1767, which is a 61.8% retracement of the loss from $1913 to $1531 (-$382), a typical size for this type of recovery. That leaves open the possibility (40% probability?) that gold will have another dip to test the target areas mentioned. The higher the price goes above $1767, the greater the probability that the low was in at $1531.

Once this correction has been completed, Intermediate Wave III of Major THREE will be underway. This should be the largest and strongest wave in the entire gold bull market. The target for this wave should be around $4,500 with only two 13% corrections on the way.

The word seems to be spreading.

A protester on Wall Street. Be careful what you wish for.

A Note From Alf Fields

January 18, 2011 05:14 PM

Dear CIGAs,

Firstly, to finish off on the ultra short term, here is the chart I showed a couple of days ago:

Note the small a-b-c correction from $1420. The A leg was from $1420 to $1363, a decline of $57. If the C wave is the same size, a decline of $57 from $1412.50 takes us to $1355.50.

Yesterday the PM fix was $1360.50 and the morning fix $1357.50.

Conclusion: gold has either already finished the correction or requires one minor drop below yesterday’s fixings to finish it.

Turning to the longer term picture, I sent you the following weekly price chart in mid 2009.

This is what has happened since then:

I have numbered the minor waves and concluded that wave 5 is extending. This opinion is based on the size of the corrections since the wave 4 low at $1058. The following analysis of the minor waves and their relative proportions should make this quite clear:

Wave 1 ___ 712.5 to 989.0 ___ +276.5 ___ +38.8%
Wave 2 ___ 989.0 to 870.5 ___ –118.5 ___ -12.0%
Wave 3 ___ 870.5 to 1212.5 ___ +342.0 ___ +39.3%
Wave 4 ___ 1212.5 to 1058.0 ___ -154.5 ___ -12.7%
Wave 5 ___ is extending – see analysis below.

Note: The similarity of the 12% declines above indicate that they are part of the same impulse wave. The much smaller declines of 7.9% and 5.9% are evidence that wave 5 is extending.

Extended wave 5:

Wave 5.i ___ 1058.0 to 1256.0 ___ +198 ___ +18.7%
Wave 5.iiv ___ 1256.0 to 1157.0 ___ -99 ___ -7.9%
Wave 5.iii ___ 1157.0 to 1421.0 ___ +264 ___ +22.8%
Wave 5.iv ___ 1421.0 to 1337.5 ___ -83.5 ___ -5.9%
Wave 5.v ___ 1337.5 to 1642.0 ___ +305 ___ +22.8% (forecast – assumes the same % gain as 5.iii)
Total 5 ___ 1058.0 to 1642.0 ___ +584 ___ +55.2%

If we assume that 5.v is an average of the 5.i and 5.iii gains of 18.7% and 22.8%, say 20%, the target for 5.v would be $1604. One further possibility is that the gain in wave 5 equals the overall gain in waves 1 through 3, i.e. $1212.5 from $712.5 = $500. This provides a target of $1058 + $500 = $1558.

This concludes the end of intermediate wave I of Major Three. The decline to follow the peak of wave I, (the peak being somewhere between $1558 and $1642), should be of a magnitude of between 16% to 22%.

I think that we can conclude that your $1650 forecast will come close to achievement during the up-move which should start this week.

Best wishes,
Alf Fields

Elliot Wave Gold Update 23

Alf Field
25 November 2008

As this is going to be the last of these Updates, it is appropriate to review the reasons for writing this series of articles on Elliott Wave and the gold price. This will involve revealing a lot of personal detail and also unveiling an extremely high forecast for future gold prices. The first article titled “Elliott Wave and the Gold Price” was published on 25 August, 2003. This article can be reviewed at the following site: Elliott Wave & The Gold Price

In August 2003 the gold price was in the region of $350 and there were a number of conflicting views about the future direction of the gold price. Robert Prechter, for example, was predicting a move to below $253 and possibly below $200. For a number of reasons I was of the opinion that gold was in the very early stages of a major bull market. My views were thus the opposite of Prechter’s and I eventually plucked up the courage to say so.

I count Robert Prechter as a friend, so my purpose was not to disparage his views. I was more interested in setting up some parameters or guidelines that would help determine the likely outcome if the gold price exceeded those levels. I concluded that if the gold price dropped below $309, the odds would favour Prechter’s view. If it pushed above $382, then my bullish view would probably be favoured.

This was more than just an academic exercise because in 2002 I had made a major change to our family investments, moving some 40% of the capital into gold and silver bullion plus a selection of gold and silver mining shares. If Prechter’s view prevailed, our family finances would have taken a serious drubbing.

Another reason for publishing the Updates was to illustrate a major advantage of the EWP, which is the ability to prepare a template forecast (or “road map”) of how the market is likely to unfold in both the long and short term, including the possible terminal prices. The original article produced a template based on the rhythms that had been observed in the early stages of the bull market, based naturally on the assumption that my bullish views would prevail.

The early stages of the bull market revealed corrections of 4%, 8% and 16% at increasing orders of wave magnitude. Those numbers were used in the original template published in that 2003 article, a template that forecast that the first major move upwards could reach $630 after which a correction of the order of 25% to 33% would probably follow. In fact, if the sequence had been extended logically, the larger correction should be double 16%, or 32%, but this was shaved to 25-33%.

I thought that the $630 forecast was conservative and that this number would probably have to be adjusted upwards later once the minor waves unfolded. In 2003, with gold in the mid $300’s, a forecast of $630 was both courageous and extremely daring. There was no purpose served in taking the exercise beyond that point until after the $630 target had been achieved.

In addition, the 2003 article concluded that if $382 was surpassed, then the gold price would move rapidly to $424 without a serious correction. That did indeed happen, with gold reaching $425 before the anticipated correction occurred. That success encouraged me to write an article updating the original forecast. I did not anticipate that the consequence of that first update would be the production of this Update 23 some five years later.

There was a further undisclosed reason for writing these articles and that was to eventually highlight the massive potential of the gold bull market. I was reluctant to reveal what I really believed in 2003 as it was so bullish that it would have invited the arrival of the guys with straight jackets and padded cells.

As this will be the last of these Updates, I will reveal my previously unpublished “back of the envelope” calculations in 2003. They were as follows.

Major ONE up from $256 to approximately $750 (a Fibonacci 3 times the $255 low);
Major TWO down from $750 to $500 (a serious decline of 33%);
Major THREE up from $500 to $2,500 (a Fibonacci 5 times the $500 low);
Major FOUR down from $2,500 to $2,000 (another serious decline);
Major FIVE up from $2,000 to $6,000 (also a 3 fold increase, same as ONE)

A case can be made for an 8 fold increase in Major FIVE, which would continue the Fibonacci sequence 3, 5, 8. You can do the maths if you like, but the fact is you can pick your own number for the gain in Major FIVE. Three times the low of $2,000 was actually the conservative expectation, producing a bull market peak target of $6,000.

I would not have invested 40% of the family capital into gold, silver and the corresponding mining shares based solely on my bullish EWP expectations. The following is a quote extracted from “Elliott Wave and the Gold Price” written in 2003 and referenced above:

“I am not a gung-ho advocate of the EWP. I discovered not only its strengths but also its weaknesses. I prefer to have fundamentals, technicals and the EWP all in place (if possible) before committing myself to an investment.”

As mentioned in this quotation, I prefer to have fundamental and technical analyses in line with the EWP before committing to a position. Obviously I was satisfied with the fundamental and technical out look for gold when I made the dramatic change in our investment portfolio in 2002.

The technical analysis included the following:

The 21-year bear market in precious metals had ended with the multi-decade down trend line being broken on the upside.
The precious metal markets were oversold with sentiment and emotional indicators sporting extreme negative readings with bullish connotations.
In the 1970’s bull market, gold increased from a low of $35 to a peak of $850, a massive 24.3 times the low price. If the current bull market was to be of the same order, then one could project an ultimate peak of over $6,221 ($256 x 24.3). This matched the $6,000 target determined under the EWP.
The fundamental analysis was the real clincher. I had become convinced that the world, and especially the USA, was heading for a major financial crisis that would be so powerful that it would overwhelm all other factors. It would become the single most important criteria impacting on investment decisions. Privately I referred to this as the “Big Kahuna” crisis.

I anticipated that the Big Kahuna would give rise to the risk of a systemic meltdown, which would result in the authorities “throwing money at problems”, bailing out all the banks and large corporations that got into trouble. This would lead to the destruction of the currency. I wrote about this in more detail in “Seven D’s of the developing Disaster” in April, 2005, an article that can be found at: The Seven D’s Of The Developing Disaster

The consequence of the systemic meltdown would be a vast increase in newly created money which would result in a massive rise in the gold price of the order that I was anticipating. A further consequence would be the introduction of new national and international monetary systems. Several articles followed in the next few years, culminating in “Crisis Cogitations” which was published just 2 weeks ago at: Crisis Cogitations
If you haven’t read “Crisis Cogitations”, I would urge you to do so in order to better understand the current crisis. Obviously the current financial crisis is the Big Kahuna that I had been anticipating, although I didn’t expect it to take five years to emerge.

Reverting back to the situation in 2003, both the technical and fundamental underpinnings for gold seemed to be pretty solid. Consequently I felt confident that the bullish EWP forecasts, both the shorter term and the undisclosed longer term expectation, would work out. There was no purpose served in revealing the potential for the market to reach $6,000. To get there, gold had to get to the $630 target first, which was a sufficiently daring forecast in 2003.

The current situation

The chart below depicts the COMEX Gold price on a weekly basis. In February 2006, in Update IV, the $630 target was increased to $768 as a result of intervening market action. A couple of months later the gold price exceeded $630 and moved to $733 in May 2006. From that point a 23% correction to $563 occurred.

Confusion reigned because a relatively minor correction had been anticipated, to be followed by a rise to $768. Thereafter the long awaited 25% to 33% correction was scheduled to occur. Instead, the decline measured 23% and the obvious conclusion was that this was the long awaited 25% to 33% correction, albeit slightly stunted. Quite possibly I was overly influenced by my previously unpublished rough target of $750 followed by a decline to $500. The actual outcome of a peak of $733 and a correction to $563 was remarkably close to my rough estimate and seemed to adequately fit the requirement for the end of Major ONE and the corrective wave Major TWO. In coming to this conclusion I glossed over the fact that the correction to $563 was an obvious triangle, and triangles are almost always 4th waves, yet I was calling it a 2nd wave, Major TWO. I also glossed over the fact that the correction was below the 25% to 33% magnitude required.

I mentioned previously that the early corrections were 4%, 8% and 16% at increasing orders of magnitude. If one were to be pedantic, one would say that the next level of correction should be 32%. Looking at the chart below, the correction from $1015 to $699 is 31%! It sticks out like a sore thumb. Surely this is exactly the 32% correction that we should have been anticipating for Major TWO?

Assuming that the $699 low on 23 October 2008 turns out to be the actual low point of the correction, and that remains to be proven, then we can conclude that we have seen the low point for Major TWO. That will allow us to update my original “back of the envelope” template to much higher levels, as follows:

Major ONE up from $256 to $1,015 (actually 4 times the $255 low);
Major TWO down from $1015 to $699, say $700 (a decline of 31%);
Major THREE up from $700 to $3,500 (a Fibonacci 5 times the $500 low);
Major FOUR down from $3,500 to $2,500 (a 29% decline);
Major FIVE up from $2,500 to $10,000 (also a 4 fold increase, same as ONE)

Once again, you can pick your number for the gain in FIVE and multiply it by $2,500. The numbers become astronomical and can really only be possible in a runaway inflationary environment, something which many thinking people are suggesting has become a possibility as a result of the actions taken during the current crisis.

Concentrating on the $3,500 target for Major THREE, which is a five fold increase from the low point of about $700, there is a case advanced in “Crisis Cogitations” for a five fold increase in money and prices in order to arrive at a “Less Hard” economic landing. In the USA, total debt recently exceeded $50 trillion and this is unsustainable given an economy with a GDP of only $14 trillion. The suggestion is that the debt level will reduce through bankruptcies to say $35 trillion while the new money created to save the situation will push up the nominal GDP to $70 trillion. A $35 trillion debt level is manageable with a GDP of $70 trillion.

It requires a five fold increase in prices to achieve the above result. Gold has retained its purchasing power over the centuries and will no doubt continue to do so in the current environment. Consequently gold will almost certainly increase five fold (or more) if the level of prices in the USA increases five fold.

In “Crisis Cogitations” it is acknowledged that the current credit/debt deflation could get out of hand and result in a serious deflationary depression. There is debate as to how gold will react in a deflationary environment, but the fact is that in a serious depression bankruptcies will be rife and price levels will decline. This may result in cash and Government bonds performing better than gold, but this is not certain. Gold cannot go bankrupt and is thus an asset that people can hold with confidence in a deflationary depression. It is possible that demand for a “safe haven” investment may be large enough to cause the metal to perform better than cash or Government Bonds.

The odds, however, strongly favour an inflationary outcome. Given a strong will and the ability to create any amount of new money via the electronic money machine, it seems a foregone conclusion that runaway inflation will be the end result. If Mugabe could do it in Zimbabwe, there seems little doubt that Ben Bernanke and his associates in other countries will have no trouble in doing it too.

Why quit writing these reports?

I have noticed from the emails that I receive that many people are using these reports to guide their trading activities in gold. I have had no objection to this in the past, but feel that it would be foolish to trade gold in the circumstances of the Big Kahuna crisis that we are living though at the moment. It has become a question of individual financial survival in an environment where things are happening more rapidly and with increasing violence. I feel very strongly that it is time to quietly hold onto one’s gold insurance and not attempt to trade it. I do not wish to provide interim levels that may cause people to be encouraged to trade their gold to skim a few extra fiat dollars or other currencies, but lose their gold as a result.

So it is Good Bye, Good Luck and God Bless,

Alf Field
25 November 2008
Comments to: ajfield@attglobal.net

Disclosure and Disclaimer Statement: The author is not a disinterested party. He has personal investments in gold and silver bullion, as well as in gold, silver, uranium and base metal mining shares. The author’s objective in writing this article is to interest potential investors in this subject to the point where they are encouraged to conduct their own further diligent research. Neither the information nor the opinions expressed should be construed as a solicitation to buy or sell any stock, currency or commodity. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions. The author has neither been paid nor received any other inducement to write this article.