Gold price going to $4,500: Here's why - Alf Field

Details of Alf Field's gold predictions at the Gold Symposium in Sydney which see gold going to $4,500 but the possibility of a big correction first.

Author: Lorimer Wilson
Posted:  Monday , 28 Nov 2011 

TORONTO (www.munKNEE.com) - 
The Elliott Wave Theory (EW) gives superb results in predicting the gold price. While it is a complicated system with many difficult rules which I explain in simple terms, I have determined that once this present correction in gold has been completed it should undergo the largest and strongest wave in the entire gold bull market. The target for this wave should be around $4,500 with only two 13% corrections on the way.
So said Alf Field in his 6,500 word speech that he came out of retirement to give at the recent Sydney Gold Symposium. The speech has been edited into this 2000 word article and an initial 1400 word article published here last week entitled The "Moses" generation and the future of gold - Alf Field.
The portion of the speech entitled "ADDENDUM: Update of the Elliott Wave Gold Analysis" has been edited ([  ]), abridged (...) and reformatted wherever deemed necessary to ensure a fast and easy read. Field's views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article
As Field said in his speech:
"On 31 December 1974 the largest and wealthiest nation on Earth allowed its citizens to buy and own gold...and the obvious conclusion was that it was necessary to resort to technical analysis to find a way to predict movements in the gold price. I experimented with a variety of technical systems and then got lucky. I discovered that the Elliott Wave Theory (EW) gave superb results in predicting the gold price [although] I couldn't get the same great results using EW in other commodities or markets."
HOW THE ELLIOTT WAVE THEORY WORKS
"EW is a complicated system with many difficult rules, but I will try and explain it in simple terms. The technique is to concentrate on the corrections. In terms of EW, the sequence in a bull market is as follows. The market rises, has a 4% correction, rises, has a 4% correction and rises again. At this point the next correction jumps from 4% to a larger degree of magnitude, say 8%. The market then repeats the sequence: a rise, a 4% correction, a rise, a 4% correction, a rise and another 8% correction. When the market is eventually due a third 8% correction, the magnitude of that correction jumps from 8% to 16%. This sequence is repeated until two 16% corrections have occurred when the size of the next big correction jumps to 32%".
APPLYING THE ELLIOTT WAVE THEORY TO THE PROGRESSION IN THE PRICE OF GOLD
"The beauty of EW is that the corrections in gold are remarkably regular and consistent. Early in 2002 I picked up the 4%, 4%, 8% rhythm in the gold market which convinced me that a new bull market had started in gold. Another feature of EW is that once one is confident that these percentages have been established and one has some idea of the approximate size of the up moves, simple arithmetic allows one to calculate a forecast of the future price trend.
"Using this method I calculated that the gold price should rise from the $300 ruling in 2002 to at least $750 without having anything worse than two 16% corrections on the way. That was valuable information at that time. Furthermore, from the $750 target a big 32% correction could be expected to about $500. Then the bull market would resume, rising to perhaps $2,500 before another 32% correction occurred. The final up-move would take the gold price to much higher levels, possibly $6,000. Once again, a valuable insight when gold was $300 in 2002."


"The gold price actually got to a shade over $1000 in March 2008, a four-fold increase instead of the expected three-fold rise to $750. That was the point at which the 32% correction was due. Over the next seven months the gold price in the spot market declined from $1003 to $680, an exact 32% correction. Using PM gold fixings, the numbers were slightly different. The high was $1011.0 and the low $712.5, making the correction slightly less than 30%, but quite adequate.
"The above chart depicts the monthly spot gold prices since the start of the gold bull market in April 2001 when gold was $255. The 32% correction in terms of spot gold is clearly shown. The high at $1003 and the low at $680 established the extremities of the first two major waves of the bull market, shown in the chart as Major ONE and Major TWO. The gold bull market is in the process of working its way upward through Major THREE, often the longest and strongest wave in the bull market. There have been a number of interesting and unusual developments in Major THREE which will be discussed later.
"[Below I] reveal some interesting things about the EW moves in gold since the $681 low in October 2008. That low was the start of the Major THREE wave. In Major ONE I mentioned that the corrections were 4%, 8%, 16% and then 32%. We know that Major THREE will likely be longer and stronger than the prior Major ONE up wave. It is logical to expect that the corrections in major THREE will be a larger percentage than those experienced in Major ONE.
"This is how the first Intermediate wave of Major THREE developed in terms of London PM fixings:"
"Intermediate Wave I in London PM fixings:

1. Oct 08 to Feb 09 $712.5 to $989.0 + $276.5 +38.8%
2. Feb 09 to Apl 09 $989.0 to $870.5 -$118.5 -12.0%
3. Apl 09 to Dec 09 $870.5 to $1212.5 +$342.0 +39.3%
4. Dec 09 to Feb 10 $1212.5 to $1058.0 -$154.5 -12.7%
5. Feb 10 to Jun 2011 $1058.0 to $1549.0 +$491.0 +46.4%

"[The above] are typical of the beautifully consistent sizes of EW waves in gold. There are two up waves of about 39% and two corrections of about 12%. Several things can be determined from these numbers. In February 2010 it was possible to pencil in a target for wave 5 of $1470, being a 39% rise from the wave 4 low of $1058. The 12% corrections are larger than the 8% for the equivalent waves in Major ONE, which was expected. One can deduce that the correction to follow wave 5 will be one degree larger than 12%, possibly double this figure. The target for wave 5 of $1470 was exceeded mainly because this became an extended wave. It reached a high of $1549 for a gain of 46.4%...Extended waves are simply waves that subdivide into an additional 5 waves. It happens mainly to 5^th waves and generally makes life difficult for EW analysts. [It is] difficult yes, but not impossible.
"The analysis of the first extension, the extension of wave 5, is set out below:

*Alf Field's entire speech at The Gold Symposium in Sydney is available here
Lorimer Wilson is editor of  www.munKNEE.com and www.FinancialArticleSummariesToday.com and publisher of a daily free Financial Intelligence Report which can be subscribed to here.