1/ I analyzed #gold's performance during prior inflationary cycles & here's what I was able to find out...
Quickly, let's define a bull market as the production of higher highs & higher lows over time.
Let's dive in ๐งต
Quickly, let's define a bull market as the production of higher highs & higher lows over time.
Let's dive in ๐งต
2/ Gold started a massive bull run in August 1977, seeing the price rise 8.6x through the peak in Jan 1980.
We can clearly identify breakouts, higher highs, & higher lows.
In 1980, price failed to make new highs & then proceeded to make lower lows. Market structure weakened!
We can clearly identify breakouts, higher highs, & higher lows.
In 1980, price failed to make new highs & then proceeded to make lower lows. Market structure weakened!
3/ What happened next?
Gold would consolidate for nearly two decades thereafter. The maximum drawdown was -70.8%.
Gold was extremely volatile during this time, and experienced several drawdowns worse than -20%.
Returns evaporated.
The prior chart is shown by the yellow range.
Gold would consolidate for nearly two decades thereafter. The maximum drawdown was -70.8%.
Gold was extremely volatile during this time, and experienced several drawdowns worse than -20%.
Returns evaporated.
The prior chart is shown by the yellow range.
4/ Starting in 2001, gold experienced very similar behavior (history rhymes, but doesn't repeat).
Breakout, higher highs, higher lows, new breakout.
From 2001-2011, the price of gold increased by a factor of 7.5x. In 2011, it officially failed to make higher highs.
Breakout, higher highs, higher lows, new breakout.
From 2001-2011, the price of gold increased by a factor of 7.5x. In 2011, it officially failed to make higher highs.
5/ Since those highs in 2011, gold fell -45% through the lows in 2015. It's been experiencing a massive consolidation phase.
Here's the monthly chart from 2001 - Present in logarithmic scale, with the prior chart zone shown in yellow:
Here's the monthly chart from 2001 - Present in logarithmic scale, with the prior chart zone shown in yellow:
6/ Gold made new highs in mid-2020 as a result of two factors:
1. Massive flood to safety from pandemic unknowns.
2. Massive flood of fiscal & monetary stimulus.
However, the market quickly regained a "risk-on" sentiment & gold got punished. It fell -20% from the ATH's.
1. Massive flood to safety from pandemic unknowns.
2. Massive flood of fiscal & monetary stimulus.
However, the market quickly regained a "risk-on" sentiment & gold got punished. It fell -20% from the ATH's.
7/ Investors have shown no appetite for the shiny rock for the past 18 months, despite 40-year highs in inflation.
However, with the Fed's monetary tightening around the corner, the yield curve flattening & geopolitical risks rising, investors are again showing demand for gold.
However, with the Fed's monetary tightening around the corner, the yield curve flattening & geopolitical risks rising, investors are again showing demand for gold.
8/ Will gold's recent momentum last? I don't know.
What I do know is that breakouts to new highs within an uptrend have generally produced strong returns during former inflationary cycles.
If gold can break above the 2020 highs, I'll be watching closely...
END
What I do know is that breakouts to new highs within an uptrend have generally produced strong returns during former inflationary cycles.
If gold can break above the 2020 highs, I'll be watching closely...
END
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