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History Shows We Should Expect a Gold Stocks Bear Market in 2014
Over the last half century, gold stocks have a 23% to 72% decline every three years.
James Debevec    

Since 1964, gold stocks have seemed to follow a three-year cycle. Every three years, they establish a peak and then start a 23% to 72% decline.
 
In the table below, the data before 1983 is in the Barron's Gold Mining Index (which is weekly). The data after 1983 is in the PHLX Gold/Silver Sector Index (INDEXNASDAQ:XAU) (daily with a December 1983 inception). This indicator did not work as consistently prior to 1964.



In the table above, the most common month for a top was a tie between March and July. Those two months together accounted for half the peaks. The 2014 high in gold stocks thus far has been on March 14.
 
If you look at the 11 post-1979 dates, seven of them saw gold stocks peak on April 8 or earlier. Let's look at the four years that had a post-April 8 peak and see if there was any weakness in the first half of the year.



In 1987 and 1999, gold stocks had a 28%/25% decline commence in the first 3.5 months of the year and a second decline of 72%/54% start in September. Therefore, gold stocks have had a 24.62% decline that started before April 15 nine out of the last 11 times in the three-year cycle peak years.

This leaves us with only two instances since 1979 when there was not a 24.62% decline that started before April 15. While the 2002 correction was relatively subdued, all of the gains from the subsequent March 8 to June 4 rally were wiped out (and 9.5% more) by July 26. The only three-year cycle peak year since the 1970s when gold stocks managed to make it to July before a major decline set in was 1993.

The minimum decline in the table is -23.77%. If the XAU were to decline by that amount from its March 14 high, precious metal stocks would retest the 2013 lows. This fits in with last month's article, which was based on a completely different indicator, but reached a similar conclusion. The signals that show up in both indicators are April 14, 1987 (-28% in 69 days), March 9, 2005 (-24% in 68 days), and March 14, 2008 (-22% in first 48 days). If the cycle would continue, it would likely also adversely affect owners of GDX, GDXJ, SIL, SILJ, NUGT and JNUG.

James Debevec runs AbsoluteValueResearch.com.
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No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
History Shows We Should Expect a Gold Stocks Bear Market in 2014
Over the last half century, gold stocks have a 23% to 72% decline every three years.
James Debevec    

Since 1964, gold stocks have seemed to follow a three-year cycle. Every three years, they establish a peak and then start a 23% to 72% decline.
 
In the table below, the data before 1983 is in the Barron's Gold Mining Index (which is weekly). The data after 1983 is in the PHLX Gold/Silver Sector Index (INDEXNASDAQ:XAU) (daily with a December 1983 inception). This indicator did not work as consistently prior to 1964.



In the table above, the most common month for a top was a tie between March and July. Those two months together accounted for half the peaks. The 2014 high in gold stocks thus far has been on March 14.
 
If you look at the 11 post-1979 dates, seven of them saw gold stocks peak on April 8 or earlier. Let's look at the four years that had a post-April 8 peak and see if there was any weakness in the first half of the year.



In 1987 and 1999, gold stocks had a 28%/25% decline commence in the first 3.5 months of the year and a second decline of 72%/54% start in September. Therefore, gold stocks have had a 24.62% decline that started before April 15 nine out of the last 11 times in the three-year cycle peak years.

This leaves us with only two instances since 1979 when there was not a 24.62% decline that started before April 15. While the 2002 correction was relatively subdued, all of the gains from the subsequent March 8 to June 4 rally were wiped out (and 9.5% more) by July 26. The only three-year cycle peak year since the 1970s when gold stocks managed to make it to July before a major decline set in was 1993.

The minimum decline in the table is -23.77%. If the XAU were to decline by that amount from its March 14 high, precious metal stocks would retest the 2013 lows. This fits in with last month's article, which was based on a completely different indicator, but reached a similar conclusion. The signals that show up in both indicators are April 14, 1987 (-28% in 69 days), March 9, 2005 (-24% in 68 days), and March 14, 2008 (-22% in first 48 days). If the cycle would continue, it would likely also adversely affect owners of GDX, GDXJ, SIL, SILJ, NUGT and JNUG.

James Debevec runs AbsoluteValueResearch.com.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap
History Shows We Should Expect a Gold Stocks Bear Market in 2014
Over the last half century, gold stocks have a 23% to 72% decline every three years.
James Debevec    

Since 1964, gold stocks have seemed to follow a three-year cycle. Every three years, they establish a peak and then start a 23% to 72% decline.
 
In the table below, the data before 1983 is in the Barron's Gold Mining Index (which is weekly). The data after 1983 is in the PHLX Gold/Silver Sector Index (INDEXNASDAQ:XAU) (daily with a December 1983 inception). This indicator did not work as consistently prior to 1964.



In the table above, the most common month for a top was a tie between March and July. Those two months together accounted for half the peaks. The 2014 high in gold stocks thus far has been on March 14.
 
If you look at the 11 post-1979 dates, seven of them saw gold stocks peak on April 8 or earlier. Let's look at the four years that had a post-April 8 peak and see if there was any weakness in the first half of the year.



In 1987 and 1999, gold stocks had a 28%/25% decline commence in the first 3.5 months of the year and a second decline of 72%/54% start in September. Therefore, gold stocks have had a 24.62% decline that started before April 15 nine out of the last 11 times in the three-year cycle peak years.

This leaves us with only two instances since 1979 when there was not a 24.62% decline that started before April 15. While the 2002 correction was relatively subdued, all of the gains from the subsequent March 8 to June 4 rally were wiped out (and 9.5% more) by July 26. The only three-year cycle peak year since the 1970s when gold stocks managed to make it to July before a major decline set in was 1993.

The minimum decline in the table is -23.77%. If the XAU were to decline by that amount from its March 14 high, precious metal stocks would retest the 2013 lows. This fits in with last month's article, which was based on a completely different indicator, but reached a similar conclusion. The signals that show up in both indicators are April 14, 1987 (-28% in 69 days), March 9, 2005 (-24% in 68 days), and March 14, 2008 (-22% in first 48 days). If the cycle would continue, it would likely also adversely affect owners of GDX, GDXJ, SIL, SILJ, NUGT and JNUG.

James Debevec runs AbsoluteValueResearch.com.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
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