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>>> Ned Davis: If Gold Follows 1980s Pattern, Expect $660 An Ounce



http://blogs.barrons.com/focusonfunds/2014/10/02/ned-davis-if-gold-follows-1980s-pattern-expect-660-an-ounce/?mod=yahoobarrons&ru=yahoo




By Teresa Rivas


No doubt it’s been a difficult to be a goldbug lately. However, as a note from Ned Davis Research postulates, it could be much worse.

John LaForge and Warren Pies write that from its peak in January 1980 through its trough in February of 1985, gold suffered 65.8% losses. So far in this cycle, it’s lost 35.7% from its August 2011 peak, so if it were to follow its 1980s path, it could easily slip below $700 an anouce.

There were a number of factors working against gold in the 1980s, but notable among them was the strength of the U.S. dollar: It rose 54% from January 1980 to February 1985, versus as basket of major currencies. LaForge and Pies write that it’s not difficult to see how the same pattern could play out again, weighing on gold. These waters aren’t friendly to contrarian investors, who usually lose out when betting against a rising dollar. Nor does it seem like a time for bargain hunters in gold, if the price is in danger of falling significantly more and pessimism hasn’t yet reached its peak.

They conclude: ”Gold is not worth additional capital at this point. It is oversold, but is trending poorly. Like gold, the overall commodity super-cycle looks to be dying.”

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