Major Signals Suggest New Gold Bull Market Coming Soon?

Written by Austrolib

Assuming the fundamental argument of the gold bulls is correct and that:

  • a rising dollar supply means rising price inflation,
  • a rising price inflation means a rising gold price (and over the last century that is certainly the case)
  • the question is did we just see a major trend change? What follows are three major signals that we have…[and] that this stage of the gold bull market since 2001 could be the wildest yet.

    Signal #1 – 2008 vs. 2016 Bottom

    2008

    The last time a gold bear market bottomed, albeit a little bitty one by time, was March to October 2008. In that window, gold dropped 34% in 8 months. The climb out of that bear looked like this:

  • An initial 22.4% rally over the course of four weeks,
  • followed by a cooling off period of 7 weeks (from November 25, 2008 to January 15, 2009) where gold didn’t do much of anything on net…[losing just] 4%.
  • Chart 1

    Importantly, the rally was confirmed by gold stocks as measured by the HUI Gold Bugs Index, below. The HUI is followed closely by the Market Vectors Gold Miners ETF (NYSEARCA:GDX):

  • The initial spring out of the gate for gold stocks back then brought them 65% higher in those first 4 weeks, outperforming the metal itself by almost 3x,
  • followed by more out-performance by gold stocks during the ensuing cooling off period. The HUI still outperformed gold, losing 2.5% versus gold’s loss of 4% over the same time period.
  • Chart 2

    The fact that gold miners were outperforming gold both on the way up and on the way down was a good sign the bottom was in. Overall, in that time period, gold stocks outperformed the underlying metal by about 3x.

    2016

    Fast forward to now, and we have the same pattern. Here’s gold from January 19th when the HUI last bottomed, to March 18th, 2016:

  • We see the same initial rally, this time 17% in 3 weeks,
  • followed by a cooling off period of 6 weeks, where gold declines 1% on net.
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    Author: Travis Esquivel

    Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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