Wednesday, October 8, 2014

1973 History Rhymes

 Dear readers,

January of 1973 was the end of the Smithsonian Agreement and Switzerland started to float the Franc. On October 19, 1973 an oil embargo was placed on the United States by Arab members of OPEC in retaliation to the U.S. government's support of Israel during the Yom Kippur War. The embargo would last till March of 1974, but not before causing one of the worst energy crisis in the history of the developed world. Oil prices TRIPLED in a few months. Arab oil revenues exploded - much of which was spent on GOLD, inspiring a 50% rise in gold from October to March. 

The current gold correction and the geopolitical situation in the Middle East remind me of the October 1973 Oil Embargo, when gold went from approximately a $60 low in 1973 to $190 new all-time high in March 1974, breaking the 1973 high of $135. The news then was Arab wars, currency wars, oil and gold. Today we have the same and it's even worse, we have sanctions on Russia, BRICS collaborating against USD reserve status and Saudi Arabia is pissed that the US is supporting Israel again. If history is any guide then gold will break the 2011 high of $1,925 and rise to $2,695 or 40% above the previous high just like in 1973-74. So assuming that some type of "Black Swan" occurs before the end of 2014 (maybe it has already occurred?) we could see gold skyrocket to new ALL-TIME highs by April 2015. If we don't get a "Black Swan" this year then maybe in 2015 and a new high in 2016? Either way gold is going to break the 2011 high within the next few years.

It would not surprise me at all to see gold go straight up to $2,600 before the summer of 2015.


Bosko Kacarevic

This chart is from the "History of Gold" picture in my office.

See section "10 and 11" on the chart: