In this article, I compare the price action of gold in 2016 to another, older, critical period in the history of the gold market: 1976. I am not saying…that we will necessarily repeat the experience of the 1976 – 1980 gold bull market (if we did, we would see gold rocket to $8,000-$10,000 an ounce in the years ahead), but I do expect an enormous bull market for gold in the years ahead. Whether that means $3,000 or $6,000 or $8,000 an ounce, I cannot say for certain.
The comments above and below are excerpts from an article by Geoffrey Caveney (Dr. StrangeMarket) which may have been enhanced – edited ([ ]) and abridged (…) – by munKNEE.com (Your Key to Making Money!) to provide you with a faster & easier read. Register to receive our bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner.)
…If you…take all of the 1970s’ gold prices…and multiply them all by 10, you will see a striking similarity to the highs and lows of the gold price in more recent times up to the present:
- The old $35/troy ounce gold price is like the end of 2002 when the gold price was around $350.
- The high of $195 at the end of 1974 is comparable to the 2011 high above $1900.
- The low of $103.50 in August of 1976 is similar to the low of $1051 just last December of 2015.
This comparison gives us a guide to understanding the price action so far in the gold bull market of 2016.
The Gold Bull Market Of Fall 1976
It is not well-remembered by comparison with the huge gains of 1973-1974 and 1979-1980, but gold went on a very important rally in the fall of 1976. After dropping to $103.50 in late August, the price shot all the way up to $139 by the middle of November. Here is a chart of the gold price just in 1976:
Fall 1976 Is A Lot Like Early 2016
Again, using the simple x10 multiplier to convert 1970s’ gold prices to current prices, we see that the fall of 1976 rally from $103.50 to $139 [+34%] is very similar to our new gold bull market of 2016, when gold rallied from $1051 last December to as high as $1366 in early July [+30%] in the wake of the Brexit vote.
The Corrections of November 1976 and October 2016
The comparison even continues to the recent gold price correction that we are still in the middle of right now. Gold dropped from $1338 as recently as September 26 to $1254 [-6.3%]on October 6. Well, the size and speed of the drop is similar to what happened in the middle of November in 1976: After the big rally to $138.85 on November 15, gold suddenly dropped back to $128.65 [-7.3%] on November 18…
What Happened After November 1976
After the little bull market of Fall 1976 and the correction in November, the gold price remained range-bound for months, stuck between $128 and $138 until late February 1977. Then it shot up to $153.55 in late March 1977, but came right back to $137 in mid-June 1977, but of course, we all know what happened to the gold price in the years after that:
I am not saying that the 10x multiplier will hold up in the years ahead, or that we will necessarily repeat the experience of the gold bull market of 1976-1980. If we did, we would see gold rocket to $8,000-$10,000 an ounce in the years ahead. That may happen, but the move may not be so extreme. [However,] I do expect an enormous bull market for gold in the years ahead. Whether that means $3,000 or $6,000 or $8,000 an ounce, I cannot say for certain.
The point [of the above analyses is that] the comparisons with the ups and downs and twists and turns of the gold market in the 1970s show us that all of this has happened before so it should be no surprise if and when the experience of the 1976-1980 gold market happens again too.
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