Will Gold Glitter Or Fizzle In 2016? (Part 5)

Another reason I believe a new bull market in gold is upon us towards the end of 2016 is due to interest rate and stock market price correlation movements that one can see on the chart below.

This chart clearly shows a negative correlation between the price of stocks, and a rising Fed Funds rate.  As the Fed starts raising rates, history shows that the stock market will start to decline as well. Conspicuously,  gold has made its two largest moves shortly after a sharp correction in stocks. The gold bull market that started in the year 2000 occurred shortly after the tech bubble bust. Moreover,  the rapid rise that started in 2009, which sent the price of gold from $700 dollars an ounce to its 2011 high of $1950 an ounce, came shortly after the bursting of the housing bubble.

These are the reasons that I believe that the gold bear market is almost over, and a new bull market will arise late in 2016. I personally think that the new gold bull market won’t be realized by a lot of people until 2018, because this upcoming year should be the last year of the current bear market. 

Conclusion

If you only learn one thing from this 5 Part 5, I hope it is to not get caught up in the extraneous noise that gold sellers will throw at you. When analyzing where gold is going, the only thing that matters is real interest rates. There are a lot of stories (and that’s what they are, stories) about China buying gold, paper vs physical, etc., but the truth is that none of those stories matter, or will have any material effect on the price. Consequently, these stories are certainly not worth your time and energy.