Below is a chart of Gold from 2002 to 2021, reflecting Price Momentum data.
Below is the price chart of Dome Mines (DM) from 1918 to 1968. Continue reading
Posted in DM, Dome Mines, gold
Below are the valuation targets for Barrick Gold Corp. (GOLD) for the next 10 years. Continue reading
Below is the annual 52-week low for Dome Mines (DM) from 1960 to 1968. We’ve also included the Effective Fed Funds Rate as a comparison to show how gold mining stocks perform against the backdrop of rising interest rates.
In this example, the Effective Fed Funds Rate increased from 1.98% to 6.02%. Meanwhile, Dome Mines (DM) had a 52-week low range from $17.12 to $46.25.
Posted in 1958-1968, Chart of the Day, Dome Mines, gold, interest rates
Below is the annual 52-week low for Campbell Red Lake Mines (CRK) from 1960 to 1968. We’ve also included the Effective Fed Funds Rate as a comparison to show how gold mining stocks perform against the backdrop of rising interest rates.
In this example, the Effective Fed Funds Rate increased from 1.98% to 6.02%. Meanwhile, Campbell Red Lake Mines (CRK) had a 52-week low range from $9.63 to $24.00.
We like the comparison between the “freely” traded price of gold compared to the Nasdaq Composite index because it really shows the difference between the performance in the two over the years.
Most importantly, gold began trading “freely” at around the same time of the initial trading of the Nasdaq Composite Index. Therefore, there is little in the way of distortion in the data. Below is the daily price of gold versus the Nasdaq Composite.
Posted in gold, Nasdaq Composite
Charles H. Dow, co-founder of the Wall Street Journal, once said:
“For the past 25 years the commodity market and the stock market have moved almost exactly together. The index number representing many commodities rose from 88 in 1878 to 120 in 1881. It dropped back to 90 in 1885, rose to 95 in 1891, dropped back to 73 in 1896, and recovered to 90 in 1900. Furthermore, index numbers kept in Europe and applied to quite different commodities had almost exactly the same movement in the same time. It is not necessary to say to anyone familiar with the course of the stock market that this has been exactly the course of stocks in the same period ( source: Dow, Charles. Review and Outlook. Wall Street Journal.February 21, 1901.)”
There is no exactness between the relative percentage change in the Dow Jones Industrial Average and the price of a commodity like gold. However, since the January 26, 2018 peak in the DJIA, there has been a lot of sympathy moves in the price of gold and the DJIA.
Posted in Charles H. Dow, DJIA, gold
We have been quoted here on many occasions saying that when the general equity market takes a dive of –10% or more, so too does gold stocks by a greater margin. Our point, gold stocks are not a hedge from general market drops.
In our September 24, 2014 article titled “Gold Stocks: Risks and Remedies” we highlighted the numerous instances from 1939 to 2011 of when the Dow declined by more than -10% and showed how either the Barron’s Gold Mining Index or the Philadelphia Gold & Silver Stock Index declined by a greater percentage.
In the recent decline of the DJIA from January 26, 2018 to February 8, 2018, the index declined –10.36%. So how much did the Philadelphia Gold & Silver Stock Index (XAU) decline? The XAU declined –11.57%.
In the chart above, we have excluded the decline of –14.75% from January 24, 2018 to February 9, 2018 in the XAU index. Add this to the growing list of instances of when the DJIA declines more than –10% and gold stocks also decline by a greater percentage.
Posted in DJIA, gold, gold bugs, Gold Stock Indicator, XAU
Gold is currently languishing in a trading range between $1,366 to $1,049. This trading range is thought by many to be a pause before the eventual increase above the previous high at $1,895. After all, the price of gold had managed to decline from $1,895 to the low of $1,049.40, a drop of –44.62%. Part of the thinking of a new high in gold is predicated on the idea that we are entering a phase of rising inflation after years of decreasing inflation from the 1980 peak.
Introduction
If the thinking is that gold is on the cusp of new highs, there is one question that we need to answer. The question is, “What happens with the price of gold in the early stages of an inflation cycle?” What is amazing about this question is that in the early stages of the last inflation cycle from 1939 to 1942, gold was fixed at $35 until 1971.
Never in the history of the United States have investors seen the reaction of the price of gold to the early stages of rising interest rates. In this posting, we’ll attempt to show a reasonable benchmark for gauging what would happen if there weren’t restriction on the price of gold.
Silver is the perfect means to convey the message of what would have happened to the price of gold if it were allowed to navigate the whims of Mr. Market. While silver is more volatile than gold and prone to extremes it still tells the story of gold when gold did not have a voice.
Interest Rate and Inflation Cycle
We start with the price of silver from the peak in 1925 because, according to Dewey and Dakin's in their 1947 book Cycles: The Science of Prediction, the last peak in wholesale prices, which generally corresponds to interest rates. If you have a beat on interest rates, you can get a better sense of where we are and where we might be going as it relates to precious metals.
Remember, you don’t have to be a fan of cycle theory to appreciate the quality of analysis that reflects what has already happened from a book written in 1947. Calling the peak in 1979 and the trough at 2006, while not exact, is the best way to learn from the past. Looking at the 3-month Treasury, we can see the fulfillment of an entire cycle in rates from 1940 to 2009.
Just think, there is no official data that extends from prior to 1934 to the present. Without this important continuous information, it is difficult to find data that we can compare like-for-like stages in the cycle. However, we do have data from the price of silver in the previous cycle top to the low that corresponds to the low in interest rates and silver. This will be our introduction to the secret history of gold.
Posted in BGMI, Dakin, Dewey, gold, Interest Rate Monitor, interest rates, Silver
On September 17, 2017, we said the following:
“We’re still in the diabolical no-man’s land where, according to Dow Theory, the previous trend (bear market) is in place until proven otherwise.”
The price of gold continues to confound even the most bullish gold analyst. However, as we can see below, it is make-or-break time for the precious metal.
Dow Theory attempts to define and identify major moves in markets referenced here as the “primary trend.” In this piece, we will outline the price of gold according to Dow Theory.
We’re going to review and analyze the primary trend that extends from the September 2011 peak to the currently established low in the price of gold in December 2015. We believe that this information is critical to understanding where we are and where we might be going. This interpretation is based on the work of Charles H. Dow, co-founder of the Wall Street Journal and namesake to the longest continuous stock market indexes.
Keep in mind that all of the analysis that follows is done in generalities so that an individual who is curious about Dow Theory can refer to the technical manual on the topic titled The Dow Theory by Robert Rhea. However, the true heart of Dow’s theory is found in his original writing which covered the topic of earnings, dividends, effect of dilution of shares and economic outlook AND NOT lines on a chart. Two books that cover Charles H. Dow’s work as a fundamental analyst and an adept economist are titled Dow Theory: Unplugged and Charles H. Dow: Economist, respectively.
Lines on a Chart
Dow Theory has been synthesized down to a level of lines on a chart, which isn’t all bad. The lines still reflect fundamental economics. The challenge is the accurate interpretation of what is implied by the meaning of those lines.