10 December 2005
Gold's Fractal Story
Gold, like other fluid tradeable commodities, equities, and
bonds has its own interested group of investors and supporting money.
Gold, while recently surging to multiyearly highs with the help of
Chinese and Indian acquired dollars for Xmas foo foo snow bears and
onerous dinnertime telemarketing sales respectively, is remarkably
about 300 dollars shy of its spectacular secondcycle second fractal
growth peaking in 1980. Considering the sky high amount of dollars created
since 1980, and their puny and weakened purchasing power(consider the
cost of a San Diego house in 1980), gold's recent performance in its
third 1314 year fractal growth has been underwhelmingly anemic and
unimpressive.
Gold has roughly followed the CRB since commodities lows were made in
concert with equities in 1932, the end of the first half equity
fractal cycle of the Second Grand Fractal starting in 1858. 36 years
later a slight fractal stir was made with a detectable initiating
growth fractal in gold from 1968 to 1970. This initiating fractal
sequence was shared somewhat between the concluding sequence of the
first fractal growth cycle from 1932 to 1970 and the second cycle
growth from 1968/70 to present. From 1970 the three phase multiyearly
growth fractal sequence has occurred: 67/1617 (ending in 1992/93)/
and 1314 years ending in 2005/06. The weakest of this final 1314
year third fractal sequence is profoundly demonstrated by its
intermediate time frame breakdown in dollarbased gold prices between
19962001 where the price dipped below 300 US dollars.
At the end of this current fractal 2x 1314 year growth sequence, a
good portion of creditors owning US bonds and cash equivalents are
members of the eastern world who have traditionally measured wealth in
units of the yellow metal. Considering the inherent traditional
eastern propensity to acquire gold, it is quite amazing, that with
their dollar and dollar equivalent holdings, gold's price has not
exceeded its peak 1980 second fractal price. While the total quantity of
world gold in last twenty five years has not changed appreciably, the
1980 price was supported by perhaps less than ten percent of the
currently available dollars and dollar equivalents. This paradox is
indicative of the amount of debt that is asset and official debt
instrument obligated and which depresses and determines the real
amount of investment money available in the complex moneyassetdebt
system.
If, as the current gestalt macro long cycle fractal progression strongly
suggests, credit soon will contract  as macroeconomically determined
by debt load, asset overproduction, and asset and service inflation
relative to inadequately increasing consumer wages  all asset classes
will suffer the concrete reality effects of ubiquitously contracting values of
assets and asset mechanistic positive feedback devaluations, just as has
occurred in every preceding major 6080 year cyclical, fractal and
macroeconomic devolution. At the end of the decay process, the east
will still have its indestructible dollars and bonds, which will be
useful in acquiring the world's residual and finite energy stores. At
or near the bottom of the devolution, the only other politically
allowable cash conversion for foreign held dollars will be towards the
acquisition of the barbaric yellow relic. And even more so than after the
conclusions of prior major credit cycles, gold (and oil) will lead the
depressed commodities in the next rising phoenix of fractal growth
evolution.
While the first terminal equity fractal cycle of XAU and NEM was 56
days in length, it started about 78 days earlier than the equities'
56 day cycle. The gold equities second fractal cycle ended at the same time as the equities
concluding its fractal with a characteristic second cycle terminal nonlinear
lower gap. The combined second fractal cycles was therefore about 8 days longer
with an extended 2.5x of about 147148 days. The maximal third growth
cycle would ideally be a equal length or 147148 days. The recent gap in XAU is
suggestive that the third terminal 2.5 x fractal is in its finals days. The daily
count for physical Comex gold is 8/17 of1620.
From a vantage point forward from about 1970, with the exception of the
nonlinear lower gaps characterizing the second subfractals of the last
23 years, there is only one major nonlinear gap that is easily seen on a daily
chart for any three year window for NEM which ended in a major nodal and underlying slope
line low. This occurred in November 1992 and characterized the end of
the 1617 year second gold equity fractals. Since November 1992 the monthly fractal sequence has been
28/70/63 of ?70. Notice two items. The second fractal sequence ended
at exactly 2.5x, with the base of the first fractal sequence equally x or 28 months.
Secondly notice again the breakdown in the gold equities second 70 month fractal that
occurred when investment money was siphoned from the gold investment
area to first support the high tech bubble and later during the high
tech's first 89 months of devolution after March 2000. October 1987
should provide further guidance for those thinking that gold stocks
will do well during equity collapses. Notice that the terminal portion of the second fractal is 2728 months
providing a subfractal first base number for November 1992's third
fractal. The low using this fractal base would be expected in 6870
months. The gold equities are currently in their 63rd month
of this deterministic mechanistic fractal phenomena.
For those thinking the apex of the third 1314 year fractal will
challenge its second fractal high in 1980, think again. The coming devolution in asset
prices will completely and rapidly suck out the smaller volume of hot
air and available cash that is supporting the 2005 gold balloon.
Relative to its remarkable performance in 1980, which was uninfluenced
and unsupported by the now massive dollars holdings of the Eastern
aurophiles, the apical conclusion of the third fractal will
retrospectively, in a grand context, be seen as going out with a
moderate hiccup and whimper, rather than a boom.
Gary Lammert
