Since June 29, 2015, the price of gold has declined –3.67% while the gold and silver stock index (XAU) declined -15.19%.
The recent declines are nothing compared to the full extent of the carnage that has been witnessed since the 2010 peak in gold stocks which have fallen –76%. Meanwhile, the price of gold from the 2011 peak has declined -40.22%.
This decline is very much similar to the percentage declines experienced in the period from 1974 to 1976 when gold fell –44% and gold stocks fell –68%.
The following two quotes from Richard Russell (near the low in the gold market) seem appropriate given the current market conditions:
“The great fortunes have been made in the market by buying shares that no one wanted. S. African golds are nearing that point now. For those willing to "buy'em and put'em away," for those willing to write off a possible loss against a possible major gain, many of the marginal S. African gold shares are interesting now (Russell, Richard. Dow Theory Letters. April 2, 1976. page 6.).”
“In August of 1975 the golds fell out of the triangle and entered into one of the worst bear market collapses I have ever seen. By mid-1976 about 75% of all gold mine values were wiped out. Guessing at bear market bottoms for stock groups is always a hazardous occupation. Certainly, the action of the last month must be considered a panic in gold shares. Bear markets often end with downside panic action. Therefore, in view of the time element of the bear market, the severity of the recent chaotic panic action, and the current gold pessimism, I am guessing that we will see the lows for most gold shares in this area. But I would say that holding gold shares is an uninteresting proposition unless relative strength for the group turns bullish. It hasn’t yet (Russell, Richard. Dow Theory Letters. July 30, 1976. page 5.).”
