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Gold: 3 Hurdles Toward The Next Bull Market

Mark Ungewitter profile picture
Mark Ungewitter


  • Major bull markets in gold are a fact of financial life, occurring 40% of the time since gold was floated in 1971.
  • Gold entered a bear market in 2011, providing a tailwind for common stocks.
  • This article presents three indicators likely to signal the next bull market in gold.

Colleagues who share my interest in long-term trends have recently asked: Why so quiet on gold? The answer is simple. Gold entered a bear market in 2011, and has not yet established a major bull market.

So what would constitute a major bull market? There are three hurdles by my reckoning.

First, gold must surpass its July 2016 high of $1,380. This would mark the first higher high - following a higher low - since 2011. Higher highs and higher lows are the essence of a bull market. A market must stop going down before it can go up.

Chart 1. Price is everything

Second, gold must demonstrate long-term strength in all major currencies. The best bull markets have occurred after gold has achieved 12-month highs in dollar, euro, and yen terms. Why should this matter? A demonstration of strength in all major currencies indicates a bull market of global scope, independent of cross-currency fluctuations.

Chart 2. Gold in three currencies

Third, gold must establish long-term relative strength versus the S&P 500. The best bull markets have occurred when gold has outperformed equities. This makes sense when gold is viewed as a measure of confidence in the institutions of money and credit. A loss of confidence in money (exemplified by the 1970s' wage/price spiral) or credit (exemplified by the millennial credit boom and bust) favors the most senior monetary asset - gold - over the most junior claim in the capital structure - equities.

Chart 3. Senior monetary asset vs. junior financial claim

Mainstream financial analysts tend to ignore gold. Gold is mentioned only once in the CFA Institute's 85-page body of knowledge. But major bull markets in gold are a fact of financial life, occurring 40% of the time since gold was floated in 1971.

Currently, a bear market in

This article was written by

Mark Ungewitter profile picture
Mark Ungewitter is a private investor. He was formerly a Senior Vice President at Charter Trust Company in Concord, New Hampshire and Director of Portfolio Management at Investors Bank and Trust in Boston, Massachusetts. He holds an M.S. from Bentley University and a B.S. from Massachusetts College of Liberal Arts. He is a member of the American Association of Professional Technical Analysts.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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