Indicators Suggest Gold Stocks and Silver Will Double

The recent gold stock bear market has had a fifth largest decline in history and is also the third longest in history. Every single time gold stocks dropped 61%-73%, they went up at least 164%. The latest bear market has declined 62.1% so far from its high in April 2011.

By James Debevec
Jul 01, 2013 11:17 am

Gold Stocks

The recent gold stock bear market has had the fifth largest decline in history (data starts December 1938). It is also the third longest in history. Let’s look at what has happened after 60% gold stock bear markets.

gold stock market

Every single time gold stocks went down 61% to 73%, they went up least 164%. The initial leg of the 1980-2000 gold stock bear market was -73% in one year and 8.3 months. At this point gold stocks had a 205% bear market rally. This means only the 1939-1942 bear went as down long as the recent bear without a 164% rally. As for the pesky 1942 instance, the 1937-1942 “regular stocks” bear market was the third worst bear market in the history of the US going back to 1800 (behind 1929-1932 and 1835-1842). There are no US stock bear markets, depressions or World Wars now. So one can argue that the current situation is not as dire as 1942 and perhaps gold stocks are overdue for a rally.

Is the recent bear the final cyclical bear of a secular bull market like 1974-1976? Or is this decline more akin to the first leg down of secular bear market a la 1980-1982? The first rally coming from the 1976 bottom went up 275% before a brief bear market in January 1980. And gold stocks went up 205% in the first bear market rally from the 1982 low as previously mentioned. Either way gold stocks tripled.

Over the 32 weeks ending June 27, 2013, gold stocks underperformed the S&P (INDEXSP:.INX) by 53.05%. This is the second worst 32-week stretch of gold stock underperformance in at least 74 years. The worst stretch was the 54.78% underperformance in the 32 weeks ending on October 24, 2008. Note this was the exact day of the gold stocks bottom. Here are other extreme readings:

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