Sunday, October 4, 2015

2015.10.02 Gold Cycle Model Chart

2015.10.02 Gold Cycle Model Chart

















The gold cycle model continues to suggest a rise in price, however, several of the longer term decadal cycles continue to extend within their error parameters. However, the Z-score is also extending into 5 sigma territory, so if a reversal does not occur in the next few weeks, the usefulness of the model can be seriously questioned.  The model provides an example of what happens when cycles extend within their error parameters.  The model run from 2015.05.15 is shown below and here on the blog.


2015.05.12 Gold Cycle Model Chart

4 comments:

beetlejuice said...

Just another example of "intervention" having an effect upon the natural order of market cycles. It can be seen literally everywhere. We are living in an era of a huge experiment. It will either work OR fail with disastrous consequences for all humanity for decades to come.

A Jones said...

The experiment in intervention will ultimately fail, as it cannot possibly go on 'forever'.
I think these charts are becoming less and less useful as a result; I just don't see any connection with the 'manipulated' real world. That's been true of DJIA and S&P for years and years.
It now seems that things are destined to be 'awesome' for the profligate few, for some time to come. What disturbs most people is the length of time this has continued and the fact that it solidly looks set to continue.

Paolo said...

A Jones and Beetlejuice - both make valid points. These models are based on histroical cycles, so Fed intervention is seen by the models as "noise." The more noise, the harder it becomes to find a signal. On the other hand, philosophically, I do not believe the Fed can forever hold off the business/commodity cycles.

As far as nuances in interpretation - the gold model has been phase shifting forward, but it is still within its error limits and converges nicely. There were some comments both on this blog and elsewhere by self-defined commodity experts calling for much lower gold prices at this time point, some as low as $700. As imperfect as the models are, the chance of $700 or even $900 gold from the model parameters would have been 1/1,000,000. The narrative was that the Fed would (ha!, fooled you again Charlie Brown!) raise rates and the dollar would strengthen so it was "obvious." However, that narrative was not informed by the cyclical nature of gold prices and it was very wrong.

So - remembering that all models are wrong but some are useful - if you look back at the previous model charts where large divergences, quantified by Z-score, between the prediction and the actual curve occurred, almost every single time there was reversal within a few days to a few months.

A Jones said...

17 Nov - It seems that, sadly, the Fed is all-powerful and continues to be so. New lows in Gold today. TBH a reversal seems farther away than ever.