Historical Review Of Gold And Silver…Their Bull Markets Continue

January 6, 2016

How goes the bull market in gold and silver?  Believe it or not they are still in a bull market, though after the past three years I expect most people understand the current decline as a bear market.  Either way doubts about the old monetary metals’ ability to rise above their all-time highs have grown.  But in big bull markets corrections such as we’ve seen since 2011 are always hard on the bulls.

First item to study is a table listing yearly closing prices for gold and silver since 1977.  Keep in mind the prices and percentages listed are not for yearly highs or lows but for the last trade of the year.  That makes a difference.  Gold’s last trade for 1979 was $533; but weeks later it was over $800 an ounce with silver seeing a close of just under $50.

I left a gap for the years from 1980 to 1989, but you can see how the metals declined during the last twelve years of the 1980-2001 bear market.  Bear markets have good years too, just as bull markets see down years.  What made this bear market so prolonged and deep was the fact that there was a hot market in stocks and bonds for risk capital to flow into.  Who sought the safety of precious metals in an era where inflation from the Federal Reserve was freely flowing into high flying financial assets like internet and software stocks?

However, with the coming of the 21st Century the stock market saw its first crisis of the Greenspan era with the rupturing of the high-tech bubble.  As the high flying NASDAQ glamor shares deflated in the early years of the new century something changed – gold and silver began a bull market for the second time since the US government abandoned the Bretton Woods’ $35 an ounce gold peg in August 1971.  Gold saw uninterrupted yearly advances from 2001 to 2012 as silver saw only two down years.  It can’t be denied how since 2012 the metals have seen three hard years. But below we see the monetization of US Treasury Debt by the global central banking system since 2001, and reasonable people, like me, have to ask why this should be so?

Below is a comparison of the 1982-2000 Dow Jones’ bull markets with the first fifteen years of the bull market for gold.  Year zero for the Dow Jones is 1981, 2000 for gold.  The interesting fact about this data is how the annual percentage advances for the first twelve years of these bull markets sees gold’s annual advances frequently superior to the gains seen in the Dow Jones.  What is also interesting is that the financial media during the 1980s and 90s made much of the advancing Dow Jones, while these same “financial experts” chose to mostly ignore a major bull market in gold and silver during the 21st Century.

The extreme prejudice  gold, silver and their miners have suffered since their bull markets began in 2001 up to April 2011 is evident in the table below comparing their performance (Green) with the Dow Jones Total Market Groups (DJTMG: yellow/grey ) with major market indexes (Black) with the growth in the national debt, CinC and CPI (Red).  The best performing asset for the eleven years spanning January 2001 to May 2011 was an ounce of silver (#1) with an ounce of gold (#4) and the precious metal miners (#3,9 & 12) not far behind, but investors would not have known that by following the financial media.

The old monetary metals and their miners in the table above have endured serious disrespect by the financial media since 2001, and since 2011 it’s has only gotten worse.  But that isn’t necessarily bad for precious metal bulls.  To see such excellent performance without wide public participation or promotion by Wall Street is remarkable.  Before their bull markets are over PM assets will become the must have investment, just as Microsoft was during the 1990s, and the media will be forced to recognize the advances in gold and silver, even if they curse them as they advance.  Keep in mind that unlike shares of high-tech companies and units of currency, ounces of gold and silver and tons of ore reserves cannot be increased at the whim of bankers.  The day is coming when the world will once again realize why gold and silver are “precious metals”; because unlike units of currency managed by central banks, gold and silver truly are rare.

Here’s a chart plotting the indexed values for the Dow Jones (Blue Plot), NASDAQ Composite index (Red Plot) gold (Green Plot) and silver (Black Plot) during their respective bull markets.  Note how the bull market for the Dow Jones and NASDAQ Composite lasted 918 weeks, but the NASDAQ didn’t break away from the Dow Jones until Week 845 (October 1998) with the introduction of the “Greenspan Put.”

Moving on to the current bull market for gold and silver, the difficulty gold and silver have seen since 2011 is there for all to see, but I expect the worst of their declines are now over.  There is a sound reason for my optimism.  Inflation flowing from central banks, as seen in my first chart, never flows directly into the prices of gold and silver.  Instead the financial system funnels monetary inflation into financial assets creating “bull markets” in stocks, bonds and real estate which economists and “market experts” confound for “economic growth.”  Gold and silver have their bull markets when the inflationary bubbles in financial assets begin to deflate, as was the case when the high-tech and mortgage bubbles popped in 2000 and 2007.

After decades of ill-advised monetary inflation flowing from the global central banking cartel, global financial assets are currently grossly overvalued and ripe for massive deflationary bear markets.  This is precisely the environment where the old monetary metals come into their own as safe havens as wealth based on deflating stocks, bonds and real estate valuations flee the ravages of Mr Bear.  There is good reason to expect 2016, and the years to follow will be good for precious metal assets as today there are so many problems in the world and so little gold and silver.

Mark J. Lundeen


In the Aztec language the name for gold is teocuitlatl which means "excrement of the gods."

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