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Last time
gold fell for 3 months running was March 2001. And so...?
It had become
so rare, you could take its absence for granted to buy gold on the cheap.
Between March
2001 and April 2012, the price of gold never fell for 3 months in succession.
So expecting
"two months max" made for a great signal to buy gold on pullbacks,
most recently in Jan. 2010 (your last chance below $1100) and April 2009
(last chance below $900).
That third
month just never came. Until April 2012.
Three
consecutive months of falling prices to buy gold are rare however
you count it. Since 1957 in fact, they've struck only 65 times in a total of
661 three-month periods. And such drops - let's call them recessions to save
me having to re-title these charts again - are rarer still in the US stock
market.
The S&P
has delivered only 55 runs of 3-month drops over the same 55-year period.
As both
charts show, 3-month recessions are rarest of all in a runaway bull market.
The S&P put in none between 1991 and 1999, just as prices to buy gold put in none
between 2001 and spring 2012.
So, is this
3-month tumble the last straw for gold, finally snapping the camel's back after the big hump of $1920 per ounce in
summer last year? After all, the big top of Jan. 1980 - after which gold prices spent two
decades in decline - took almost a year to deliver a 3-month run of falling
prices. Which then came thick and fast after that.
But 3-month
declines don't necessarily signal a bear trend. The S&P suffered such
falls in each of July, August and September last year - making for five
monthly falls on the trot, in fact, over spring/summer 2011. But the US stock
index still went on to recover and top that starting level. Just as it went
on to recover and blast through its previous highs after hitting a run of
3-month recessions in 1990, not even mid-way through its long 18-year bull
run.
Check also
the sharp pullback in Dollar gold prices during
1975-76 on our chart above. Gold fell in seventeen of those 24 months,
halving from top to bottom and recording ten 3-month recessions, more than
during any other two-year period, including the early 1980s or the big Brown
Bottom of the late 1990s.
Who was to
know, amid that mid-70s bloodbath, that gold was on its way to rising 6-fold
again?
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