Your Road Map to the Bull Market in Gold

Does this sound like your world?

You trudge to the office, nervous about keeping your job. Some of your friends are out of work. The economy struggles, and recession seems just around the corner. Stores where you once shopped are now closed. Americans are still shooting and being shot at in the Middle East. The price of oil is far off its peak but remains high.

The government has promised action, but frankly you don't like the president's ideas nor trust the government's judgment, since they don't seem to notice that the budget and trade deficits are huge and show no sign of easing. 

You invested in some gold and gold stocks, but they're all down. Everything has lost value. Things are looking grim indeed.

If any of this sounds familiar, you've got a good memory. It's what was happening in November 1975. 

Yes, things didn't look so rosy back then, either. And yet look how November 1975 fits into gold's bigger picture:

Gold During the 1970s Bull Market

Now compare that chart to today's...

Gold During the Current Bull Market

You'll see that from 1970 to 1974, gold rose 400%. In our market (2000 to 2008), gold climbed 290% to its March 2008 peak.

From 1974 to 1976, gold fell 40%. In the current market, gold has fallen 31% in eight months, a much steeper decline.

Finally, during the three-year rise leading to gold's peak of $850 in 1980, it gained 670% from its 1976 low.

This year's gold price has been behaving much as it did in 1975.

So where will the price be a few years from now? I can tell you that Casey Research expects gold's chart to look more and more like the 1970s before this is over. The U.S. government has only very recently fired the starting gun for racing inflation, but it has fired it very loudly.

In just the last two months, the Fed has increased the basic money supply (cash in circulation plus deposits held by commercial banks at the 12 Federal Reserve Banks) by nearly 50%. Nothing close to such a rapid increase has ever happened before in the U.S. It's the kind of news that normally comes only from desperate banana republics. And it always means rapid price inflation is on the way.

What the Federal Reserve has done in the last two months guarantees high inflation. But the timing is unknown. In fact, it's unknowable.

Looking at the past, a pop in the basic money supply gets felt strongly throughout the financial markets within six months or so. But that's just the average experience, with some inflationary episodes running much faster and others running much slower. And our current situation is anything but average – very recent but extreme money growth colliding with a years-old but extreme credit crisis.

So we'll have to sit and let the timing show itself. And if what you are sitting on is gold, you should sit comfortably. Patience served gold investors well in the mid-70s. It will serve them well again.

Regards,

Jeff Clark