Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

History's Opinion on the Gold Price Crash

Commodities / Gold and Silver 2013 Jun 27, 2013 - 04:24 AM GMT

By: Adrian_Ash

Commodities

This crash in gold is hardly unprecedented. Nor is the likely price action over the next one and 3 months...

So over the last three months, gold prices have sunk 25.2% for US Dollar investors. That's some drop - the 40th worst rolling 3-month period since prices were floated during the death throes of the Gold Standard in 1968.


Heavy selling created this plunge. So it's natural for longer-term holders to be weighing their options as well today. Panic selling is a clear risk. Sitting like a duck in hunting season is also a risk, of course.

But whether gold's underlying fate is to keep falling or not, today doesn't look such a smart day to rush for the exits. Not according to history at least. A short-term surge looks highly likely.

Over the last 45 years, when gold has dropped this much or worse in three months, it has typically rallied hard over the following four weeks. Better than four-fifths of the time in fact, with an average one-month rise of 11.1%. On those occasions when gold fell and extended its loss, however, the average drop for Dollar investors who held on was 5.3%.

You makes your choice, in short. But it's good to know how the historical odds are stacked, if not the future. Over the last 45 years, this dramatic a sell-off has been followed on average by a one-month rise of 8.2% overall.

Further out, however, the underlying dynamics will matter. Or so history says. And especially for non-Dollar investors.

Gold has been through six distinct periods when Dollar gold prices crashed this hard or worse over three months. Five of them saw prices rise sharply over the three months which followed. But the one gold crash which didn't knocked a big hole in the averages, nevermind the portfolios of die-hard precious metal investors.

Late 1973, like mid-1974, proved only a way station in gold's long inflationary bull market. The snapback after crashing 27% and 25% respectively was noteworthy too - a huge 92% and then 39%.

May 1980 and March 1982 also both offered a solid three-month bounce in gold (28% and 15% respectively). But like August 1981 (with its 5% rally) these gold crashes hit during what proved a very long bear market. Two decades long in fact.

So gold owners who sat on their hands during those slumps only got chance to cut their losses when the relief rallies came. And investors who sat tight in winter 1980-81 didn't even get that. Gold prices sank month over month, extending a drop of 25% by another 20% three months either side of end-February 1981.

Moral of the data? Non-Dollar investors take note. Most especially UK savers and gold owners. Because based on the early '80s - the best comparison today - it's US Dollar rallies which tend to dent gold, and keep it dented. Leaving non-Dollar and particularly Sterling-based buyers with much steeper rallies, thanks to their own currency slipping itself against the greenback. (NB:The Euro data in our table is figured from the Deutsche Mark gold price pre-1999.)

Whether to sell into those bounces, quit now or start buying fast is one choice. Trying to stay sane either way might prove more tricky. But reviewing the broader financial landscape, and remembering that history rhymes only, is also important. Good luck with what you decide.

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in