weeks ago I was being interviewed on Financial Sense
Newshour with John Embry and Bill Murphy and Jim Puplava
asked us to comment about the gold bull market of the
1970s vs. today. I thought it would be an interesting
study to put some weekly charts together remembering
the gold bull of the 70's and looking at the unfolding
gold bull of today. Let me just say that the secular
gold bull market of the 70's unfolded with much more
fireworks than phase one of the secular bull market
today. Gold was up almost 600% in the first several
years, versus the methodical and much more controlled
advance of gold today. At its recent peak gold was up
roughly 72%, far less than the explosion of the early
70's. Although there may be some similarities between
the secular gold bull market of today vs. the 70's,
this one will have its own personality and will unfold
somewhat differently than its predecessor of the 70's
leaving its own unique mark in history.
Enjoy the weekly charts of gold with supportive
moving averages from the 70's and today:
The following weekly gold chart from late
1971 through the end of May 1975 shows gold's advance
from $35 to roughly $200 an ounce. The center of the
chart shows a significant decline in gold which was
halted by the 65 week moving average. The public was
officially allowed to purchase gold on December 31,
1974 exactly at the top of the market! After peaking,
the 65 weekly moving average provided brief support
in early '75 before giving way and letting a significant
decline begin. Note the bearish divergences or declining
peaks in the RSI at the bottom of the chart as the price
of gold kept hitting new highs.
Also note the 50-week moving average,
which was very supportive for gold during its advance
in the early 70's.
The following charts show the precipitous
decline in gold after the 65 and 50-week moving averages
were decisively broken to the downside.
Another view this time showing the 50
weekly moving average:
After the dramatic correction in gold
concluded in 1976, the gold bull was back and ended
in a stampede in 1980. Note how the 50 weekly moving
average provided excellent support during the bull movement
of the 70's. Also note the weekly MACD near 100 and
the RSI near the 100 level as well!
After the secular gold bull market peaked
in 1980, gold tried to rally off the 50 weekly moving
average in late 1980, but failed. An attempted rally
back up to the 50 weekly moving average eventually failed...
...and the decline in gold began in earnest,
tumbling from around $600 to roughly $300.
Now let's move to the secular bull market
in gold today.
The following chart shows the 65
weekly moving average providing support for gold since
the terrorist attack on the United States in September
Interestingly, gold has recently broken
its 50 week moving average to the downside and rallied
back above the 50 weekly average only to fall back below
once again, a fascinating bull/bear battle taking place
along this moving average.
Looking at the gold market, one has to
look at the HUI as well. The following multi-year weekly
chart shows that the 50 weekly moving average has been
supportive during gold's advance from around the $250
level. Recently the HUI broke decisively below this
moving average. The HUI has since rallied up to the
50 weekly moving average and bounced off the average
as it is now acting as resistance. Note also the RSI
attacked the 50 level and bounced off as well.
Looking at the 65 weekly moving average,
it has also been supportive for the HUI during gold's
advance. The bull/bear battle in gold has made for interesting
action in the HUI. The HUI has broken below, moved back
above and then below, and back above, and again back
below this average, showing the fierce action between
the bulls and bears in the gold market. Again note the
failed attempt to break above the 50 line on the RSI.
What does it all mean?
As you can see, after the correction
in gold ended in the mid '70's, the gold bull stampeded
and ultimately ended in a final phase 3 mania or blowoff
to the upside, which is how all secular bull markets
end. Investors, who are long-term oriented, should be
purchasing physical gold and silver and continue to
do so on any further declines.
Investors in gold mutual funds should
add to positions in their respective funds on any further
significant drops in the HUI, should any materialize.
Those trying to time movements in and out of gold funds
should remember that the HUI peaked at around the 260
level and currently trades near the 180 level or roughly
80 points off the highs, so jumping in and out of a
gold fund at this point doesn't leave much room for
"It was never my thinking that
made big money for me. It was my sitting...
Men who can be both right and sit tight are uncommon.
I found it one of the hardest things to learn."
~ Jesse Livermore ~
What the lessons of the gold bull market
of the 70's should teach readers is that if you indeed
believe as I do that we are in a secular bull market
in gold, then you will be greatly rewarded when you
buy during significant pullbacks. In a world dominated
by fiat money, gold is the metal of kings. It has been
that way throughout history and it will be that way
© 2004 Eric King
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