Martin Armstrong vs. His Model vs. Fractal Gold

Martin Armstrong has stated his expectations for Gold and the PM Sector to fall into the June period and to continue to correct into October based on his Economic Confidence Model. The fractal work that I do off of the 70’s Precious Metals Bull market and other areas of the charts does not agree with his expectations. Thus, in this writing I take a look at how the Precious Metals Sector has performed in reference to Mr. Armstrong’s Model “bottoms” themselves.

In this article I am using the unorthodox approach of providing the conclusions of the editorial at the beginning to help the reader grasp the issues at hand.

Conclusion

1. Mr. Armstrong’s suggestion that Gold will trade down into his Model’s bottom into mid-May does not appear to fit the price movements for Gold, Silver or the HUI Index into the last two cycle bottoms on his Model.
2. Based on the chart, it appears that although the Confidence Model might be effective in reflecting confidence or lack of confidence in the Economy, it fails to reflect the resultant effect of Dollar Inflation on the Precious Metals Sector’s price movements. Thus, as Dollar Inflation is applied to counteract economic weakness, the Dollar Devaluation drives the prices of the PM Sector higher into the “Economic Confidence Low” as represented by the Model’s “bottom.” I would expect this phenomenon to increase since Competitive Currency Devaluations are, in effect, potentially magnifying the rise in Gold, Silver, and the PM stocks due to world-wide paper currency inflation at this point in the cycle. That would match what we saw in the late 70’s parabolic move, and in the Fractal PM Sector moves in early 2002 and into early 2006.
3. A further sideways move in Gold into October seems counter-intuitive considering the metrics which create the Gold Parabola. As Jim Sinclair has described in the past, a parabola is a mathematical equation of price movement accelerating versus time as price rises. The parabolic movement in the Gold Bull is thus a reflection of the collective investor psychology as the point of recognition of the different forms of inflation at hand becomes recognized by more people as time goes on at an accelerating rate.
4. Cycles which reflect tops or bottoms do not provide information on the relative relationships to other tops and bottoms as they could be either higher or lower than previous tops or bottoms.
5. The fundamental driver of $Gold is Dollar Inflation creating Dollar Devaluation. Those fundamentals suggest a rise in the PM Sector into the period of May/ June when QE II is scheduled to end. If so, after a correction of some period of time (my expectation is around 5 to 6 months duration), the Precious Metals Sector would likely again rise sharply based on the already announced fundamental Dollar Inflation needs that will have to be accommodated into late 2012 - and it will likely be a doozy of a move for the PM Sector. This “5 to 6 months out” for the next parabolic rise to begin after the next intermediate term correction, should that intermediate-term correction start in the May/ June period, would match Mr. Armstrong’s expectation for a “cycle bottom” to come in during the 4th quarter of 2011.

Mr. Armstrong’s Expectations

Mr. Armstrong’s recent writings have suggested that Gold will trade down into the bottom of his Economic Confidence Model that arrives in mid-May, stated as “2011.45” on the Model. In the first referenced writings Armstrong said: (more)