Here's my spreadsheet evaulation of the last 10 years of what happenned from about now in the year to the end of the year.
Looking at the negative (Red Cells), there were three years with significant drawdowns between the end of the first week of August and November. They are all quite unlike 2012 in that they all had quite exciting multi-decade high action in the first half of the year:
- 2006 - This is immediately following a very overbought spike in Silver with multi-decade highs in gold in the Apr/May timeframe. Not much like 2012.
- 2011 - The drawdown immediately followed a very overbought spike in Silver and a very overbought spike in Gold. Not much like 2012, but if it happens again I expect I'll handle the overbought spike better this time than ins 20122.
- 2008 - Had an all-time high in Mar and a near-double-top in July prior to the crazy gold crashing action starting at the end of the July and accelerating in early August. I'm taking the Monday of the 2nd full week of August as the end of first week of August gold price.
Even with the draw-downs, none of these years have very regrettable early August to End Of November price action if one held out to the end of November (cells G6, G8 and G11) with the worst having a -1% price move. Also, none of these years with large drawdowns were back-to-back with a similar year. I expect (but am not sure) that 2012 will not be one of those years.
The year most like 2012 is 2005 which had a nice run of around 13% (G5) between the end of the first week of August to the end of the November. It was like 2012 in terms of having an unexciting first half following a year filled with thrills and spills.
Given that 2012 is a year following a big 2nd-half drawdown, its hopeful and interesting to note that the other two such years 2007 and 2009 had the best First Week of Aug to End Of November performance at 17% and 23% respectively.
Also of interest are 2003 and 2004 which are like 2012 in that they had sharp down moves in Apr/May (touching or puncturing the lower 55-day bollinger band) and had higher lows in Jun/July than the Apr/May Lows (see green cells).
The blue cells provide reasonable price targets for the End of November all clustered around $1800. At this point I'm thinking about selling some out-of-the-money $1800 Decmember calls to make transform some of my in-the-money $1500 calls into a spread and to pocket some cash I'll turn into bullion. I expect I'll do this if we get a nice pop up near $1700 in August (see bright green G7 and G9).
Overall, I'm relying on this analysis quite a bit and its leaving me feeling quite confident at this point. The thing that has me the most worried about the 2nd half of 2012 is the gathering storm-clouds over Europe. I expect something scary and bad to happen there, but it seems likely it will drive the price of gold higher (like it did in 2011's End-Of-The-Euro scares) rather than crash the price of gold like the scary parts of 2008 did.
Following my sign-off are the charts for years most of interest to this analysis. Best wishes to you as we navigate the 2012 markets' choppy waters. What data are you most relying on as you analyze the market action from here to the end of the year? Leave me a comment.