Gold: Presidential Midterm Years and
Years Ending in Two
are Generally Positive
“We may have to hunker down, get defensive. But with the potential for stagflation gold may shine irrespective of looming major cycle lows over the next few years,” is David Chapman’s, Chief Strategist, of Enriched Investing Inc. message for 2022. Highly regarded gold analyst, David Chapman gives his analysis for gold in 2022:
“Our monthly chart of gold since 2000 still shows a possible cup and handle pattern that has been forming since the peak in 2011. We have noted some of the major cycles on the chart. The longest is the 23.5-year cycle which is ideally due during 2020–2027. The last one was seen with the double bottom in 1999 and 2001.
Its subdivision is the 7.83-year cycle last seen in 2015. Its next is due October 2023 +/- 8 months Feb 2023–June 2024. Both cycles overlap. The 7.83-year cycle subdivision is the 31.2-month sub-cycle. So far, that was seen in March 2021 which came 31 months after the August 2018 low. The 31.3-month cycle is next due in October 2023. As one can see, the three cycles overlap, raising the potential for 2023 to be our final low.
The question is the peak of the current 31.3-month cycle. Will its peak take out the August 2020 high at $2,089? Failure to do so would set up the collapse into the 23.5-year/7.83-year cycle lows. If the cup and handle is correct, we have the potential to rise to $2,300/$2,700. If instead we fail and break down, then the decline could take us to $1,200/$1,400 for the important long-term cycle lows. The breakout point for the cup and handle is above $1,900, but to confirm we’d need to see new highs above $2,089. This next rally for gold needs some staying power or it will fail. Volume on the rise would be important.
Years Ending in Two are Generally Positive
All of this suggests that 2022 for gold could be quite important. Our table below shows the 10-year gold cycle. We note that years ending in two are generally positive, with 4 up and only one down since gold became free trading in the 1970s. This included a 49% gain in 1972 and a 25% gain in 2002. As to gold’s performance in presidential midterm years, we note that since the late 1960s gold’s record is 7 up years and 5 down years. The up years have all been quite strong, including a 61% gain in 1974, while the down years have generally been weak. The worst was 1970 when gold fell about 9%.
There are a number of positive signs suggesting gold could enjoy a good up year in 2022 against the background of potential stagflation and political unrest. The caveat rests on gold rising in 2022 and taking out the August 2020 high. Failure to do that would tell us we are going down to make the larger cycle lows.”
Editor’s Note: For more than 40 years, David Chapman has held senior analyst positions in the financial services industry including Chief Economist and in sectors including foreign exchange, corporate finance and equity financing, global banking and central banking systems, technical analysis of North American equity, bond, derivative and gold markets.
Enriched Investing Incorporated is an independent Investment Counsel firm with expertise in customized portfolio management solutions and retirement planning. The firm’s Portfolio Management team builds long lasting growth and income portfolios uniquely tailored and managed for each individual client’s need for a steady, reliable stream of income. For more information on Enriched Investing Inc., visit www.enrichedinvesting.com.
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