An Analysis of Gold Bull & Bear Markets From 1972 to 2013

Here are the historical bull and bear markets for Gold since 1972 (post Bretton Woods) through 2007.

“Since 1972 to 2007 there have been 14 bull and 13 bear market cycles (20% rises/declines preceded by a 20% decline/rise). The average bull market in Gold has lasted 434 days with gains of 94.89%. The average bear is a bit longer at 538 days with average declines of 33.37%.”
 

Analysis Of The Gold Bull & Bear Markets since 1972

The current bear market in Gold that started in September 2011 is a tad longer with 548 days (as of close April 19, 2013…compared to the average bear market of 538 days since 1972). Furthermore, if we assume the present gold bear market indeed bottomed last week at $1320 (intra-day low), then it was down -31%, which compares well with the average bear market decline of -33% since 1972.

Therefore, it is reasonable to conclude the latest gold bear market may well have ended –- and a NEW GOLD BULL MARKET HAS ALREADY BEGUN (with the price already up +6.4% from its intra-day low of $1,320…ie up $85 to Friday’s $1405 close).

What to Expect Going Forward

Personally, I am betting gold will continue recovery per the following Technical Analysis based on the chart below.

Take particular note how the Technical Indicators (MACD, CMF, RSI & Slow Stochastics) are ALL extreme over-sold level. Of special note is the RSI which reached a 15-year over-sold low value (see green circles).

 

This forces an objective Chartist to conclude that there is high probability gold should continue RISING…albeit in fits and starts due to recent dramatically increased volatility.

Historical RSI from 1999

In 1999 RSI was as low as today’s RSI. Consequently, the price of gold soared +27% from $254 to $327 IN ONLY TWO WEEKS.

And in the event 1999 RSI history repeats, the price of gold might (again) soar +27% to about $1676 in just a few weeks. To be sure HUI, XAU and GDX would then go bananas….ie go ballistic upward.

Furthermore, and based upon the average gold bull market increase of 94.84% since 1972, we might see the shiny yellow soar to about $2500/oz by late 2014 (assuming gold made a low this month).

Fundamentals?

They could not be better!

- India and China stepped up buying gold due to sharply discounted price

- Most major Central Banks continue accumulating gold

- Japan, USA and the Euro Union are actively deploying QE

- The global investing public is awakening to how profitable gold has been relative   to all other asset classes --- bar none

- Currency Devaluation Contagion is brewing on the horizon

- Major gold and silver coin shortages are developing worldwide

- Only about 1 percent of the world’s total Financial Assets is presently in gold – whereas it was near 5 percent in 1968 – see chart

 

In the event the above TA materializes, we may all bank on a new all-time record high gold price…possibly even BEFORE YEAR END…especially if the US Fed begins to ratchet up QE deployment.

This forces an objective Chartist to conclude that there is high probability gold should continue RISING…albeit in fits and starts due to recent dramatically increased volatility.

DISCLOSURE:

I am 50% invested in gold and silver mining stocks…and will continue accumulating more as the gold price rises.