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1948-1996 Bull Markets in Gold Stocks

- Revisited -

Founder & Chief Editor of Gold Eagle

September 6, 2002

This study was originally made and published in 1997. However, the gold market has made a secular bull reversal movement to warrant a revisit and reevaluation of future projections. This is especially relevant if one accepts the hypothesis that the XAU in deed bottomed at 50 in November 2001 - just as gold hit a low at about $273 in the same period.

The entire study encompasses a 48-year period from 1948 to 1996. All bull markets in gold equities were examined to determine price appreciations and time horizons for each gold stocks' bull cycle. For the sake of this study a bull market was defined as any increase in value of the gold stocks universe GREATER THAN 25%. Per the above parameters there were 17 distinct gold shares' bull markets during the 48-year period.

Data Normalization

In order to arrive at meaningful conclusions it was necessary to 'normalize' some of the data in order that they did not unduly influence the conclusions. One such example was the 1957-1969 bull market occurrence . This bull period represented a 11.3 year bull cycle versus the average of the other 16 of only 1.2 years duration (trough to peak). Obviously, 1957-1969 bull occurrence would have skewed the curve - producing erroneous conclusions. Therefore, that gold bull cycle was deleted from all determinations.

Another normalizing factor was the fact that the 16 remaining bull cycles divided into two distinct group categories: low and high price increase clusters. That is to say 11 occurrences had gold stock price increases of between 25% to 64% - while the high price change cluster enjoyed appreciations of 124% to 372%. Therefore, we considered the two gold bull clusters separately in the hope more accurate observations and conclusions might be gleaned from the results.

Following is the analysis and the detailed data of the study.

1948-1996 BULL MARKETS IN GOLD STOCKS (A)
Bull Market From	Bull Market To	Price Increase (%)	Bull Period Length (Years)	Price Change Per Year (%)	Bull to Bull Cycle- Years (E)
Nov 1948 July 1950 Dec 1953 Dec 1957 Dec 1969 Dec 1971 Nov 1978 June 1982 Nov 1983 Jan 1985 July 1986 June 1989 June 1990 Nov 1992 Aug 1994 Jan 1995 Nov 1995	Nov 1949 (B) Aug 1952 (B) Jun 1957 (B) Mar 1969 (B) Apr 1971 (B) Aug 1974 (B) Oct 1980 (B) May 1983 (B) Mar 1984 (B) Aug 1985 (B) Sept 1987 (B) Jan 1990 (C) Aug 1990 (C) Jan 1994 (C) Sept 1994 (C) July 1995 (C) Feb 1996 (C)	31 43 63 331 64 349 372 201 26 25 191 55 36 124 26 35 45	1.0 2.1 3.6 11.3 1.4 2.8 2.0 0.9 0.4 0.7 1.2 0.7 0.3 1.1 0.1 0.5 0.3	31.0 20.5 17.5 29.3 45.7 124.6 186.0 223.0 65.0 35.7 159.2 78.6 120.0 112.7 260.0 70.0 150.0	---- 0.7 1.3 0.6 0.7 0.7 4.2 1.8 0.5 0.8 0.9 1.7 0.5 2.3 0.6 0.3 0.3

	All Avg. (17)	+ 119 %	1.8 Years	101.7 %	0.9 Years (F)
	Avg. (16) (D)	+ 105 %	1.2 Years	106.2 %	0.9 Years (F)
	Lo P Cluster 11	+ 41 %	1.0 Years	81.3 %	0.7 Years (F)
	Hi P Cluster 5	+ 247 %	1.6 Years	129.8 %	1.3 Years (F)

NOTES:
	(A)	Bull market defined as gains of 25% or more for period shown. Dividends not considered.
	(B)	Raw data from book, "There's Always A Bull Market" by Robert Kinsman - 1990.
	(C)	Raw data based on XAU results.
	(D)	1957-1969 occurrence deleted to normalize results due to exceptionally long bull period.
	(E)	Period lapse from the end of last gold bull market to the beginning of current bull market - which in essence is the length of the bear market.
	(F)	Bull to Bull Cycle Years for period 1978-1980 (4.2 years) was deleted to normalize the remaining data.

OBSERVATIONS

More than 65% of all the 17 gold bull markets in the past 48 years began in the three month period from November to the following January. Interestingly, the present bull market began also in November 2000.

The current bull market made a temporary peak in May 2002. But having risen too fast too far (112%), a correction set in. Specifically, the XAU fell from 89 to 55 during June and July. However, from its correction low, the XAU has rebounded about 27% in recent weeks - proving to this analyst the present bull market in gold equities is intact.

The relative low value of gold stocks to the irrationally exuberant levels of the general stock market strongly suggests this bull market in gold stocks has indeed has a great deal more life in it. Furthermore, many technical indicators corroborate this observation.

CONCLUSIONS

1. The current gold stocks' bull market which began in November 2000 has just commenced its second leg up.

2. The current gold bull period is already 1.75 years old. And although this is nearly exactly the average age of all pervious occurrences (1.8 years), this analyst believes it resembles more the December 1971-August 1974 bull run. There are a few reasons for this.

Firstly, a draconian stock market decline occurred in the same period. It was the 1973/74 Wall Street debacle where market indices dropped nearly 50%.

What Happened During the Next Great Market Crash (1973/1974)?

From the market high in 1973 to its low in 1974 the DJIA and the S&P 500 lost almost half their value - while the previously high-flying technology stocks plummeted more than 60%. Enough to cause heart-failure to the credulous believers of THIS TIME IT'S DIFFERENT. Even the relatively "safe" utilities were decimated - as they dropped more than 50% from their 1973 high to their nadir in 1974. However, students of financial history took profitable refuge in gold metal stocks. The Gold Mining Index, composed of ASA, Campbell Red Lake and Dome Mining, appreciated more than 260% from its 1973 low (40) to its 1974 high (147). This merits being redundant. During the severe 1973/74 bear market, stocks lost half their value - while gold mining companies almost quadrupled.

Fast Forward to 2002

And no one can deny stocks are extremely depressed today, and demonstrate many signs of going much lower to year end…and most probably well into 2003. Moreover, the plunging greenback seems to be in lock step with a falling stock market. These two events will fuel gold's advance, and catapult gold equities into orbit in the coming months. Seasonally, September through December are the best months of the year for bullion and gold equities.

If one accepts the premise the current gold bull will mimic the 1971-1974 gold bull run for reasons given, the XAU should eventually rise 349% in a total period of 2.8 years. Specifically, we very well might see a 190 XAU by August 2003. YES, it appears gold stocks have at least another year's appreciation to put under its belt.

Founder of Gold-Eagle in January 1997. Vronsky has over 42 years’ experience in the international investment world, having cut his financial teeth in Wall Street as a financial analyst with White Weld. Vronsky speaks three languages with indifference: English, Spanish and Brazilian Portuguese. His education includes a degree in Petroleum Engineering from the University of Oklahoma, a Liberal Arts degree from Hartnell College and a MBA in International Business Administration from UCLA – qualifying as Phi Beta Kappa and Tau Beta Pi for high scholastic achievements. Vronsky believes gold and silver will be recognized as legal tender in all 50 US states and many countries worldwide. You may reach I. M Vronsky at: [email protected] and/or [email protected]