Gold & Silver Continue To Climb “The Stairway To Hell”

Gold & Silver Continue To Climb “The Stairway To Hell”

Today top Citi analyst Tom Fitzpatrick sent King World News ten absolutely fantastic charts showing that gold and silver continue to climb what Fitzpatrick calls “The Stairway to Hell.”  Fitzpatrick also indicated that both markets are set to have massive price surges from current levels.  You are about to read one of the greatest reports on exactly where gold and silver are at this point in their bull markets, and where they are headed.

Here is Fitzpatrick’s outstanding gold and silver commentary along with 10 extraordinary charts:  “While calling a bottom in anything is always a danger, it certainly appears to us that Gold is finally finding a platform off of which the next leg higher may have already begun.  The long term structural dynamics which suggest a Gold price closer to $3500 by 2016 remain firmly in place and we do not expect them to change anytime soon.

Before feeling that Gold has in fact bottomed, though, we would like to see a (weekly) close through near-term resistance around $1321-$1338, and beyond (that level) medium-term resistance around $1522-$1532.  Such closes in our view would confirm the next leg higher in Gold has begun.

Should this in fact be the turn in Gold, it is likely Silver will actually outperform as it has done in the past.



We have been of the bias that the correction in Gold this year was just that – a deep correction – rather than an end to the long-term rally.  As such, determining when the correction is actually over is paramount as we continue to expect Gold to move towards our long-term target of $3400-$3500 by 2016 (more on this later).  While calling a bottom in anything is always a danger, it certainly appears to us that Gold is finally finding a platform off of which the next leg higher may have already begun.

The recent correction actually looks very similar to that which took place in the middle of the phenomenal Gold rally in the 1970s.  (As we have previously expressed, the current economic and asset market backdrop that we are going through is very reminiscent of that seen during the 1970s.): 

- After a rally where Gold increased five-fold, it saw a 44% correction over 17 months (1974-76), finally bottoming 14% below the 55-month moving average.

- After a rally where Gold increased seven-fold, it saw a 39% correction over 23 months (2011-13), finally stopping 14% below the 55-month moving average.  Will we look back at this point as the bottom?

As we think through that question, there are two things to consider:

Is this really a deep correction rather than the end of Gold’s long term rally? – What would we need to see to suggest the correction lower is over?  (On a side note, it is worth pointing out another similarity related to the Equity market for that time period:)

When Gold bottomed in August,1976, the Dow Jones Industrial Average rallied 6% over the next 4 weeks before putting in the multi-year high and correcting over 20% in the flowing 1 1⁄2 years.  Since Gold has hit its recent low, the Dow Jones Industrial Average has rallied 7% over the last 4 weeks and has put in a new all-time high.  We will be keeping a close eye to see if history once again repeats.

The bigger picture dynamics for a higher Gold price in the coming years has not changed (see Gold and the US debt limit chart below).



The relationship is clear.  A chart using the asset side of the balance sheet for the Fed, ECB or, more recently, the Bank of Japan would look similar. 
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