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Gold is in a bull market and so are
the gold stocks despite their struggle as a group to outperform Gold. This is
nothing new though. We’ve written about this in the past and Steve Saville has before us. Nevertheless, the miners are in a
secular bull market and investors need to pick better stocks and ignore the
hundreds of losers. The bull market is moving forward but is nowhere close to
a bubble nor the speculative zeal we saw in
2006-2007. Thus, it begs the question of what lies ahead and when can we
expect the initial stages of a bubble.
In order to figure this out we first need to get an idea of how long
the bull market will last.
Below is a great chart from Cycle
Pro Outlook. It uses John
Williams’ CPI, which is consistent over time. Interestingly, Steven
Williams of Cycle Pro has found a 17.6 year cycle between equity bull and
bear markets. It fits fairly well with the alternation between equity and
commodity bull markets.
In nominal terms the last two commodity bull markets lasted about 15
years and 18 years. Gold stocks were in a bull market from 1960 to 1980 while
Homestake Mining (a proxy for the ancient past) was
in a bull market from 1923 to 1937.
So are we looking at something closer to 15 or 20 years?
The following chart should answer that. This is the Barrons Gold Mining Index, courtesy of sharelynx.com. There isn’t much data available
on gold stocks but what is available shows that the
1980 high is roughly equivalent to the 2008 high. The gold stocks broke to a
new all-time high but it won’t be confirmed until they sustain the
breakout and make new highs. Eventually the breakout will be confirmed with
the next leg higher. The point here is do not expect
this secular bull market to end four or five years after a major multi-decade
breakout. That is too soon.
Moving along, lets
take a look at the Nasdaq because there are some
similarities. The Nasdaq had its initial rise from
1982 to 1987. Following 1987, it would be four years until the market was
able to breakout to sustained new highs. That was nine years into the bull
market. The bubble began just before the 13th year of the bull market, in
1995. The circle shows where I think we are now based on various indices
which includes my proprietary gold and silver indices.
The early conclusion is that the start of the bubble is at least a few
years away. Based on the price action we are likely to have a major breakout
and a few years of strength which will set the stage for the start of a
bubble perhaps in 2014. As you can see in the chart below, the gold stocks
while in the 11th year of their bull market have not sustained a new all-time
high for quite a while. The gold stocks are ripe for a breakout and a
powerful move higher.
The gold stocks are soon to begin the 12th year of their bull market.
As we know, most bull markets last 15 to 20 years and end in an accelerated
fashion. Based on our research we believe this bull market will end close to
2020 (say 2018). The gold stocks are slowly moving closer and closer to a
major breakout which would likely produce a multi-year acceleration that
would set the stage for the birth of a bubble. In our premium service we
manage short-term volatility and risks while keeping our eyes on the big
picture which could be extremely promising in 2012 and 2013.
Jordan Roy
Byrne
Trendsman.com
Jordan
Roy-Byrne, CMT is the editor and publisher of Trendsman.com. You can get a
free 14-day trial to his Gold/Silver service by clicking
here.
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