Tuesday, May 3, 2011

Greatest Profit Potential of the Last Decade

(This article was written today by Toby Connor / Gary Savage, my partner of the GoldScents website. If you are interested in having access to the daily and weekend reports we produce you may consider a subscription to our service here.  John)

After what should be a brief pause this week commodity markets will move into the greatest rally of the last decade. As usual I will stay focused on the precious metal markets. They have been the leaders during this entire move out of the `08 bottom and they will see the largest parabolic move of all commodities during the final leg up.

I've noted in the past that consolidation size is usually a good leading indicator of how large the following rally will be. Gold just consolidated for 5 months. That is going to produce a massive rally. It's already produced a large move and it's just started.

Gold and especially silver have already come much further than I originally expected at this stage of the game. I was looking for gold around $1650 and silver at $50 by the top of this C-wave. Silver has already reached that level and gold tagged $1575 yesterday. This has unfolded in only the first two daily cycles. The third daily cycle is where the real parabolic gains are going to occur.

The third and last daily cycle higher during the semi parabolic move in `09 added 200 points in a little over a month.

The coming parabolic move will be significantly more powerful than what happened in `09 as this will be a final C-wave move. We should easily see a 300- 350 point move in gold and it's anyone's guess as to how far silver rallies during the final parabolic finish. $65 or even $70 isn't out of the question.

Now for the downside. The final dollar collapse is also going to drive the rest of the commodity markets wildly higher. That will include the energy markets. Oil is due for a brief move down into its cycle low this week too. Once that has run its course we will see oil soar higher, possibly even reaching the `07 high of $150.

$150 oil collapsed the global economy in `07 and the economy was in much better shape with much lower unemployment than it is now. In an environment of already high unemployment $150 oil and soaring food prices are going to drive the global economy into a recession even worse than what we suffered in `08.

Social conflict in the Middle East and many emerging economies is going to intensify. People in depressed countries already can't buy food to feed their families, what do you think will be the response if food prices double again?

The world is about to pay the price for Bernanke's attempt to print prosperity and it is going to be a very steep price and cost many lives.


  1. you think these calls are still going to work?

  2. the pain just wont go away...

    did the bubble just pop?

  3. John, I know you specialize in precious metals, but can you recommend a few ETF's or specific stocks you would expect to lead the commodity rally? Thanks, Mr.G
    P.S. - really appreciate the work you put into this site.

  4. Mr. G - Some commodity ETFs that I have on my radar screen in the commodity space include: AGQ, DBA, DBC, DIG, DYY, IGE, NUGT and UCD
    P.S. - and I really appreciate the recognition you have given me. Thank you.

    Anon #1 - yes, I do think these calls are still going to work. The US Dollar finally made a swing low today to mark the end of its daily cycle. Now it will rally at the beginning of this new daily cycle then fail (trade lower than the previous cycle's low) and then it will be game on as panic hits selling the US Dollar.

    Anon #2 - yeah, pain, that is how these things work, unfortunately. All of the speculators and non-believers get kicked off the bull right when the getting is about to get real good. All I can say is be patient. These C waves always end with a parabolic rise, and we have not seen that yet.

  5. Hi John -

    The trick of course is to get in as close to the bottom of the correction as possible, and the TSI is just the thing for doing so!!

    So your thoughts please: is "re-entry" better on the way down or on the way up? Particularly in the case of silver, if what your partner says is true, that the rebound will be exceptionally violent, timing, it seems, is everything!

    Love to hear your thoughts on this, particularly if you see one or more of the 6 techniques as a better indicator than the others, etc. - the suspense of waiting for the "turn-and-burn" is killing me!!

    Thanks as always,


  6. Hi Phil - thanks for writing. Well, the trend line break idea is ready for GDX/HUI. There is a clear TSI trend line that, when broken decisively, should be an excellent starting point. The GDX/HUI closed today completely below the lower Bollinger Band. It would not surprise me to see that somewhat corrected tomorrow with another plunge to follow.

    Re-entry is always better (and safer) on the way up. Good question.

    The suspense does wear thin but I try to keep myself from becomming overly emotional. There are always going to be opportunities for those who use their head, so this particular opportunity, while unusual, is not some make or break thing - at least not for me.

    Patience and calm are virtures we all need to endure this volatility.

  7. Hi John,
    I am in AGQ and feeling sick! There was a parabolic rise in silver before it tanked. Was this rise in Silver the top of the C Wave or do we need to look at gold to determine the top of the C wave.
    Thank you.

  8. Anon - no, I don't think this was the conclusion of the C-wave by a long long shot. Yes, watch gold to determine the top of the C-wave. The US Dollar is just beginning a new daily cycle today which means the Dollar should rally for a bit. That will pressure the stock market and precious metals. But when this new dollar daily cycle fails then it will be game on for the final parabolic in both silver and gold. Easy for me to say, but relax. And thank you for your question.

  9. Hi John -

    Thanks for the very thoughtful response. You are absolutely correct. The truth be told, this is really a very somber moment in history when one considers the reason it is occuring. The author does a very good job of bringing this into perspective with the last line:

    "The world is about to pay the price for Bernanke's attempt to print prosperity and it is going to be a very steep price and cost many lives."

    Certainly we all know that doing all we can to preserve our personal savings from the money debauchers is appropriate, but others will not be as fortunate, or will simply get caught in the aftermath from a lack of understanding.

    So while there is some excitement that we will be avoiding personal loss by our actions, in a sense "beating the system," the world is going to be a pretty painful place to be . . . at least for a time . . . until we all wise up a bit.

    Thanks for perspective.


  10. Hi John. When you talk about, "The final C-wave." Are you saying this is the end of the bull run in metals, or are you saying just for this specific cycle? I'm assuming just for this cycle. Can you clear things up for me, because I'm a bit confused.


  11. Hi Adam - thanks for your question. This specific upcoming daily cycle should be the conclusion to the C-wave that started way back in May 2009.

    Then comes the vicious D-wave that last several months (not years like the C-wave) and takes back 50% of the C-wave gains.

    Hopefully by sometime next Fall the next A-wave will begin - this wave is usually fairly short in duration and is a brisk up move that is in response to the crushing descent of the D-wave that precedes it.

    Then the B-wave that is a brief correction of the A-wave run up, then the next massive C-wave begins....and finally concludes with a parabolic finale.

    I made a chart of all this stuff last summer and guess I should update it this summer when I have some time. But if you would like to see the ABCD repetitive pattern of gold from 2001 forward, try this:


  12. Hi.

    thank you for tending to our (my) emotions though this sell of. I have been holding a large postion in AGQ during the last week and i got to say it makes me feel sick at night.

    Do you think that the margin requirement razes are effecting the wave count? is is posible it is sending silver/gold into a premature d wave decline?

    Anything you can glean from the curent situation would be helpful. thanks so much!

  13. Hi ItGoes -- I just wrote a fairly lengthy response to a question similar to yours in the comment section of the newer post, "Spending 75 Minutes with the US Dollar".

    But in short, I do not think the margin requirement raises are of consequence nor do I think there is a chance in h*** we have gone into a premature D-wave decline.

    Patience is a virtue and it will serve you well to NOT sell into the conclusion of this gold daily cycle. When the new cycle begins your sick feeling will be replaced with something much better (slight understatement).

  14. John! thank you for being providing that pep talk. Hard to see this thing turning in our favor at this point - i guess that is the point. But I will trust your veteran market skills and your conviction.

  15. Thanks John-
    So much to read in these tumultuous times, but its nice to come back here for some grounding. I think the question most have is "Is there really going to be a full mature C wave finale in light of the recent correction?" I am trusting from your multitude of lessons that yes there will, but might need to here it for a 32nd time after this week!
    Always appreciate it,

  16. Hello John,
    This is the first time I've visited your site. I'm not a trader.. Most of this stuff sounds like Chinese to me but your ABCD wave is easily understood and I'm completely fascinated by it.

    I'd like to briefly explain my situation in order for you to better understand my perspective and then kindly ask for your advice.

    About 7 years ago, realizing that I was in a dead end job that paid very little, and understanding that at the age of 36 with only a high school education, two kids and a wife, my options were limited. I knew I had to do something for my family before I got any older.

    I began learning about precious metals, reading everything I could find. Silver stood out from the pack. It caught my eye. I think I paid $8 an ounce for my first silver transaction about 7 years ago.

    Since that time I've accumulated about 2000 ounces of physical bullion. Today it's worth about $75000.. 6 weeks ago, it was worth $100,000.
    I did'nt start investing in silver in order to "protect my wealth" (I don't/did'nt have any) I started investing in the hopes of making money, lots of it in order to create a better future for my kids. A $25,000 loss hit me like a ton of bricks. When Silver hit $49..and I was sitting on $100,000.. I started to think to myself, Now we are getting somewhere.. and then...Smack down!

    I have a good understanding of the fundamentals of silver and although I was shook up after the price dropped 30%, my emotions take a back seat to my intellect everything I've learned throughout the last 7 years says the fundamentals in silver have not changed.

    Because I have a budgeted amount that I spend on silver.. I can't really take advantage of today's lower price. Sure I'm able to get a little more for my money compared to a few weeks ago but basically I buy physical regardless of the price. I just keep buying what I can afford... which ,finally, brings me to my question.

    Do you think I should continue buying and holding physical or are there smarter/better ways to go about things? Obviously one of the main problems with physical is that if I wanted to sell and buy back (is this trading?) in order to take advantage of the ABCD waves, it is difficult (and scary-at least for me)to go to my local dealer with 150lbs of silver bullion and conduct a $100,000 cash transaction.

    Any thoughts and or advice would be greatly appreciated.


  17. Don -- I think you are doing absolutely GREAT! You have achieved what most people only can dream of calling their reality. Congrats!

    I have some random thoughts for you to mull over.

    First, silver and precious metals tend to have seasonal price characteristics. You could Google 'silver seasonality' or something like that and get more details if interested. My thought is that summer is usually when silver is priced lowest during the year. If you do a little homework you may decide to purchase once or twice a year when prices are best.

    Second, this bull market in precious metals and commodities in general is far from over. In fact, it should, over the next 3-5 years, accelerate prices not only higher but exponentially faster. The habit you have of buying and accumulating is a great plan and trading in and out is much riskier. Stay with what has worked for you - I have every reason to believe it will continue to work.

    Third, there are several very reputable businesses that buy and sell bullion via the Internet and mail. I have purchased and received bullion from Kitco.com and was very pleased with the experience. Another I have heard good things about is MeritFinancial.com. Check out their websites and perhaps consider some of their capabilities to either buy your silver bullion back or sell you some more!

    Best wishes to you! I think you are a very smart guy.

  18. John,
    After the recent high in silver.I kept thinking to myself, if I only sold at $49, and bought back at $35.. I would have an extra 600 ounces of silver right now. I than started searching for more information about trading which led me to your site.
    Perhaps in a couple of years as I learn from people like you, I will consider getting my feet wet but for now, your advice has helped set me back on course. (what was I thinking? LOL)
    Thanks so much for your reply!! It's very much appreciated. I wish you all the best as well!