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Gold Bull Market: Final Phase Approaching
Gold and hard assets have been in a bull market for nearly 13 years. History has shown that cyclical bull markets tend to last between 16-18 years. Of any bull market, whether in stocks or commodities, the most money is always made in the mania phase for those investors that can hang on.
By understanding how the other asset classes impact and effect one another, investors can easily understand why the mania phase has yet to arrive.
Roy-Byrne explains that bubbles cannot occur when various asset classes are challenging each other for supremacy. The parabolic move in Gold, Silver and mining equities, from 1976 until 1980, had some interesting variables worth discussing. Interest rates soared in that period, while bond prices declined. The complete opposite of today's environment. This all took place amidst rising fears of inflation. The S&P 500 peaked in Q3 1976 and didn’t bottom until Q1 1978. When it bottomed, cash flowed into gold because there was seemingly nowhere else to protect your purchasing power. The moral of the story is that overall, precious metals faced little competition in the late 1970s from conventional heavyweights: Bonds and Stocks.
The current PE ratio of the S&P 500 is 14. The bear market will not end until that reaches single digits in the coming years. In respect to bonds, Roy-Bryne notes a powerful breakout from two and a half years ago until now. It is believed bonds can move quite a bit higher from here, but a blow off top in the next 12-18 months is expected.
In regards to the debt super cycle fueling the devaluation of currencies and increased inflation concerns, look no further than this excerpt from Chris Puplava:
Looking at the outstanding debt for the top 10 combined shows that just between now and the end of the year more than $5 trillion in debt will mature, or 17% of their total outstanding debt, and by 2015 nearly 50% of the top 10 debtor nations total outstanding debt will come due. That is more than $15 trillion in debt coming due in the next two and half years!
Lastly, the writer explains one important point that as investors we ALWAYS need to remember; the majority of gains in a bull market come in the last phase. The Nasdaq gained 5-fold from 1982 to 1994 and then surged more than 7-fold in the last six years. If that is indicative of what is coming for the gold sector, hold onto your shorts. If history is any guide, the final phase of the gold bull market, which is 13 years in, should begin relatively soon.
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