If you want to do some chart and navel gazing about r-e-a-l-l-y looooooong trends go to this site and click thusly. Open a new brower window by clicking on communicator then navigator on your top menu line of netscape or the equivalent in (shudder) IE.
Now 'click' here. Or go ahead and cut and paste into your new browser location window, this link.
kitco.com
(loud click)
What do you see? A chart menu. good. Now go aaalll the way down on your right to where it says "MULTI YEAR GOLD". Click on the button that says "1975 to 2001" Now click "view charts" below.
Up will come a long string-o-spagetti that is gold's undeniable 25 year record. Curious.
What do you see? There are two things I would point out. If you look at the 350 dollar line, I would say that by Green's theorem in calculus, that it is a probable average for all the years gold's prices of that chart. There is such a number. It says that there is equal volume above the line as below it. It seems reasonable that this is the number. If that is true, then we can say something about gold's fluctuations between when Nixon unhinged it after its long artificially fixed price, and its now "floating" level. That it reached a balance around this average line that it very powerful. 26 years powerful. Let's say about $350.00. This I would call its 26 year average support level. In fact the chart shows 26 years, so you can say 26.
This is a very important figure if I were to plan a mine that would produce for the next 26 years, as I would want to know what a safe gold price would be, that I could depend on for years to come. I have to plan stopes based on their yield which is returns minus costs. I have to know both. Gold price and labour/production cost. If I don't know that inflation will take care of some of the problems on the return side, then I am in trouble. So prices of the product have to match rising costs. Mine planners really do get this technical, because their product is entirely based on fixed production schedules, and hence levels of production. So future price is not flexibly controlled. It must be known, within reason, in comparison to costs. You have to guess at it. You cannot just say "well we will raise prices of the product if we meet rising costs."
Of course I know that there will be dips below that 350 dollar level, but in fact If they are not excessively long, I can probably hold on, on the average. Here we see that this total time in 26 years is only about 11 to 12 years below the 350 line, and most of the time not far below. The longest is 5 years and one such depression is headed upwards most of that time.
Before you argue with that thesis, look at one more thing. The small continuous upward line at the end of 2001. We know that line continues to 2002 in the same way. Now look back along the chart 25 years. Do you see any similar 'seasonal' lines that are exactly 1 year long? There are many continuous one year up-lines from January to January, 85-86, 93-94 etc. Now here again I have a thesis. No such one year continuous trend in that time frame did not precede a continuous upward move of gold for at least 3 years. There are some steep upswoops that came back down in one year, but most of those were coming off a sudden depression in the price at the year's beginning. So they were not exactly like our line. Here I am saying to is that "seasonally demarked" lines are unique. It has always been thought that year to year cycles have a seasonal component.
It is not simplistic to say that most such long increase periods had such a beginning line. In fact that is the nature of commodities, that their demand increases slowly long term, and drops relatively fast.
My thesis is that 350 dollars is the support level of gold in the last 26 free years, and it is headed back up to this level.
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