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Gold: The Big Picture‏



National Inflation Association

NEWSLETTER via email

Between January 1970 and December 1974, gold rose 456.6% from $35.08 per oz to $195.25 per oz, which was followed by a 47% decline to a low in August 1976 of $103.50 per oz. Afterwards, gold rose 721.3% to a high in January 1980 of $850 per oz.

 Between April 2001 and September 2011, gold rose 630.4% from $259.45 per oz to a high of $1,895 per oz. Since gold's peak, it has declined by 43.1% to a current price of $1,078.50 per oz. Just like in the 1970s, gold has been experiencing a medium-term decline, as part of a secular bull market.

 Too many people were bullish on gold at $1,895 per oz. For gold to rise to $2,000 and beyond, we needed to first see a decline that turns everybody into bears - even the so-called "gold bugs". China's recent announcement of their latest central bank gold reserves disappointed many of the "gold bugs", who were expecting China to announce an even larger increase than it did - that would trigger a massive gold rally. With their one last hope for gold $2,000 now gone and no further short-term catalysts in sight, the "gold bugs" are finally throwing their hands in the air and giving up on gold, which means true capitulation is almost here.

 During gold's 1974-1976 decline of 47%, it had two false bottoms at $128.75 per oz and $124.60 per oz, before true capitulation occurred with gold eventually bottoming at $103.50 per oz. During gold's current decline of 43.1%, it has already experienced two false bottoms: one in June 2013 at $1,192 per oz and another in November 2014 at $1,142 per oz. The fact that these two bottoms didn't hold, has totally frustrated the most loyal "gold bugs" - who will likely end up selling at the exact bottom. If history repeats itself, we could see gold ultimately settle at $1,004.35 per oz (down 47% from its medium-term peak), followed by a move to $8,248.73 per oz (up 721.3% from its medium-term bottom).

 The Dow Jones Industrial Average priced in gold, remains down 63.3% from its August 25, 1999 peak. Back on August 21, 2011, the DJIA priced in gold was down as much as 87.1% from its August, 25, 1999 peak - but has since bounced by 184.4%.

 The stock market remains in a secular bear market. Its recent bounce is exactly like what occurred in the 1970s. Between February 9, 1966, and December 31, 1974, the DJIA priced in gold declined by 89.2% from 28.43 to a low of 3.06 - but afterwards bounced by 206.5% to a medium-term peak of 9.38. After the bounce was over, the DJIA priced in gold declined by 89% to a secular bear market low of 1.03.

 If gold bottoms at $1,004.35 per oz and the DJIA remains at yesterday's nominal close of 17,732, the DJIA would be priced at 17.66 oz of gold, for a total bounce of 205.5% from its 2011 low of 5.78 oz. This would be almost exactly in line with the DJIA/Gold ratio's 1974-1976 bounce of 206.5%. The DJIA/Gold ratio would also be extremely close to its September 3, 1929 peak of 18.44 oz - which was just prior to the Great Depression!

Since year 1900, the median DJIA/Gold ratio has been 5.49. Therefore, we are 100% sure that the DJIA's 2011 low priced in gold of 5.78 oz - was NOT the end of the stock market's secular bear market. The stock market's recent bounce and gold's recent decline - has all been completely healthy and natural. It's simply a medium-term phase that's about to end. At this moment, the Federal Reserve has tremendous credibility, but they are about to lose it! See for yourself here:


National Inflation Association  Gerard Adams  96 Linwood Plaza #172  Fort Lee, NJ 07024



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