Loading ...Can someone please tell me why gold is not in a secular bear market?
21 December 21, 2015 at 9:28 pm GMT:
I really would like any gold market analyst to lay it on the line and tell us why they think that gold is not in a SECULAR bear market, giving us good reasoned arguments for the continuation of a secular bull market, whether technical or fundamental.
I see the current chart pattern as kind of midway between the secular bear market of 1980-1999 and perhaps the cyclical bear in 1974-1976. There seem to be some features from both in the current price action in gold. The timing of this bear market is about the same as for an entire 7-8 year dollar bull market cycle on its historical chart, though gold overshot to the upside when the dollar had already bottomed between 2008-2011.
So gold could have a great upmove on the next USD down cycle perhaps from 2016-2024. That would be nearly a perfect fit. It would also make the entire last 25 years of price action (1999-2024) a gradual version of the 1971-1980 bull market but this time fitting better to the 7-8 year dollar up and down moves.
The sticking point for me is if we have real deflation and real trouble in the EU and Japan and other countries leading to a secular trend change in the US dollar index to the upside, cancelling out its last 30-45 years of devaluations.
I still can’t make up my mind whether gold is in a cyclical or secular bear market. Oil and platinum for instance obviously have been in secular bear markets since 2008. Gold was late to turn in 2011.
I keep looking at the 2011 top in gold versus the 1980 top and the 2011 top was not so extreme.
However, there was less inflation in 2011 than 1980 so inflation adjusted the difference between the two bull moves are smaller than the nominal price values suggest. Gold has been a more liquid market in this bull run with more nations participating, more paper products, more leveraged products and more mine supply than in 1980. So one would not expect a secular bull market top to be so extreme. In the same way, a Dow bubble top now would not be expected to be as extreme as in 1929.
I we look at the current gold bear market, the correction has been less extreme than in the 1980s and for silver this is even more true (silver was down about 90% from 1980 to 1982 alone). However, again, the increased liquidity and diversity of these markets might account for this and not be an excuse to think that we are not in a secular bear market for both, especially if other commodities are in secular bears already.
Eventually there will to be a US dollar bear market cycle and I wonder how it can take the dollar to new lows and gold to new highs considering the mess in the Eurozone and Japan and their increasing monetary debasement. In that case can we expect a dollar down move from 2016-2024 perhaps to produce new highs in gold? I wonder.”
Originally posted on The Korelin Economics Report daily show here:
http://www.kereport.com/2015/12/21/docs-comments-gold-oil-stock-markets/
Maybe it is a matter of semantics, but a secular bear market must last a minimum of 5 years before it can be called a “secular bear market.”
That would mean that the 1929-32 89% fall in the Dow Jones was not a secular bear market? That is stretching semantics a bit I feel. Anyway we are over 4 years in to the gold bear market (Sept 2011-Dec 2015) and it will be very unlikely that when 5 years are up in Sept 2016 it will be anywhere near the high or even within 20% of it or whatever constitutes a bear market in % fall terms.
However, I think the definitions are somewhat arbitrary. Of course 1929-32 was a secular bear market because it took until the 1950s to get back to the Dow 1929 level. Even so it was also a single cycle cyclical bear market, just one that fell 90%.
It is difficult to look at the oil and platinum markets now and say they are not secular bears, since they topped in 2008, crashed, then had a failure to make new highs in 2011 and are now back near the lows. They are 7 years’ duration so they must be secular.
However, in gold I am looking more at will the gold bear market last longer than this US dollar bull market cycle, typically 7-8 years (2008-2016?). This happened in the 1980-1999 bear, which encompassed a US dollar bull cycle (1979-1985) , a dollar bear cycle (1985-1992) with a failure of gold to make a new high, followed by another dollar bull cycle (1992-2001). Is this going to happen again?
In reality only one sector has been in secular bear trend is the valuation of Miners compared to gold price. Since 1966 the ratio of BGMI to gold has been lowest.
Since 1980’s the ratio of XAU to gold has been lowest. AND since 2011 top this ratio has sank to lowest.
There is not a single sector as low as this one. There is no end in sight.
My GO-TO analysis on the duration of secular bulls and secular bears is the analysis of Adam Hamilton: “Long Wave Valuations II” and his data over a 100 years or so says the bull and bear secular periods last about 17 years each for a 34 year long wave. The Dow’s secular bull lasted 18years from 1982 to 2000 and given Hamilton’s work the Dow is 15 years into its secular bear which should be over in 2017-2018
Dear Carolynsue, I shall take a look. I am sure I read one of those articles some time ago. However, on the surface it was seem perverse that “given Hamilton’s work the Dow is 15 years into its secular bear which should be over in 2017-2018.” The Dow is more or less at its highs even now at the end of 2015 so the secular bear has not been much of a bear! This would surely require a huge crash in the stock market between now and 2018 to complete that bear cycle otherwise it would imply a new bull market is going to follow straight on from the bull market that he is saying is a bear market in disguise!
Tim ‘Cyclesman’ Wood also calls the 2000-2015 period a bear market in the Dow because of various technical factors including trading volume.
I find these definitions troubling. Even though I can see the logic, I also see that if price is going up for the vast majority of that 15 year period how is it really a bear market? One might say it is an artificial or contrived bull market because of money printing/QE or whatever but really that is just the Fed and other central banks acting as speculators and keeping the bull market going. If you look at the Kondratiev credit cycles for instance, they seem to be getting more stretched out, so it seems impossible to me to time these cycles accurately now.
I see parallels between the 1966-1982 period in the stock market and the 2000-2015 period in stocks – and that would imply that we have just started a new bull market in the Dow with the recent breakout above 14,500 or so. In that case, the 2000-2015 period will go down in history as the bear market that wasn’t! 2013-2014 would be like 1982 when stocks broke out to a higher trading range and gold crashed into a lower trading range. This is all very weird and does not sit well with me.