Gold's Multi-Decade Bull Market Has Steeper Climbs Ahead

Robert Kientz profile picture
Robert Kientz


  • While gold is not fully valued against world currency debasement, it has still appreciated well against world currencies over time.
  • Gold and silver have beaten stocks since 2000, even as all of the cheap money corporations have been using them to subsidize their performance.
  • The US dollar index has been weakening for over 30 years. That is, other currencies are getting stronger. During the next recession, easy money won't prop up US stocks as much.
  • Gold will then run much higher once the artificial fiat money stimulus mechanism finally breaks and fails to boost economic production as it has in the past.

Gold vs. World Currencies

In a previous article, I had written about gold’s cheap price in currencies around the world. That is not to say that gold has not done well recently in different world currencies, just that it has underperformed relative to the massive printing conducted in currencies across the world.

Gold Undervalued in World Currencies

Source: Author

While accurate, my report didn’t show how strongly the metal has performed as of late. It is true that gold has done well, which should be recognized. However, the gold price still has plenty of catching up to do around the world when considering the blatant debasement the central banks have done to their fiat paper currencies in the interest of avoiding inevitable economic recessions.

Around the same time I published my gold versus currency piece, Incrementum’s recently published report "In Gold We Trust" (free registration required) called out the outstanding performance of gold versus popular currencies since 2001.

Incrementum Gold Performance Currencies

Source: Incrementum

As we can see in the table, gold has appreciated in popular world currencies by an annual average of 9.4% since 2001. Put in a different perspective, it is at least partially tracking the inflation of popular currencies during that time frame.

Gold price just hasn’t tracked all of the fiat currency that central banks have dumped into the markets. This gives gold investors reason to be bullish on the future price of gold eventually catching up with the debasement of paper money, as it has traditionally done over time.

Thankfully, Incrementum’s latest gold report provides us a handy chart for tracking US dollar cycles since 1973, shortly after the US exited the gold standard.

Incrementum Dollar Cycle Chart

Source: Incrementum

The current dollar index value action is following past downward cycles. If the trend holds true, we can expect a devaluation of the dollar against other world currencies, which would continue to be bullish for gold. Gold is still quoted and traded in many markets in dollar terms.

Gold vs. Stocks

First, I want to show the performance of both gold and silver against both the Dow and S&P since 2000. Note that the Dow and S&P are plotted as red and blue lines, respectively, while gold and silver retain their natural colors.

Gold vs Stocks

Source: Long Term Trend

Both precious metals have soundly beaten the popular stock indices since the dot-com bubble. Gold price has beaten stock market returns several times over. However, this isn’t a complete picture, as many stock investors are dividend investors and reinvest those dividends over time to increase their returns. To calculate total returns including dividends, we use the Wilshire Large-Cap index. Note, the Wilshire is plotted using a black line.

Total Stock Returns vs Gold

Source: Long Term Trend

This should dispel the notion that because gold does not provide a dividend, it cannot perform as well as stocks. During bull runs, both gold and silver have the ability to outperform the stock market indices regardless of what direction the stock markets are going.

The S&P 500 is currently in one of the strongest bull markets in its history. The following chart points out how far the current bull market has gone compared with historic S&P bull markets.

S&P500 Bulls & Bears Returns

Source: Incrementum

One should expect when the stock market indices finally turn south, precious metals investors will finally see the total returns they have come to expect over the last two decades. Investors will flee to the GLD and SLV funds when stocks reverse during the next stock bear market period, which will push up gold prices. Gold and silver have plenty of fuel left in the tank to continue their decades-long run against stocks.

Gold Bull Market Future

How much room to run? The US dollar cycle chart (above) shows the dollar in a downward trend since 1985. The dollar index reacts to each US economic recession with lower highs and lower lows, clearly pointing out the loss of confidence in US currency over the longer term.

Comparatively, the stock indices have reached all-time individual highs during the same time frame. US stocks are very overvalued relative to the world market view on dollar strength. This is largely due to the excessive fiat currency pushing up the stock markets via a period of historically high corporate debt accumulation.

Each successive dollar, however, has been worth less against a basket of other currencies. Stock markets will not rise forever; therefore, upon the creation of more cheap fiat money, each new dollar creates less inflation in the stock markets. Eventually, the relationship of excess money printing and stock market bubbles will burst completely.

Stocks will be measured more accurately in an historically stable monetary unit such as gold. In order for that price pair to reach equilibrium, gold will have to rise substantially compared to the broad stock indices.

This will occur regardless of the strength in the dollar in world currency terms. Put differently, gold has recently beaten the stock markets because of dollar weakness, even though much of the excess currency has gone into the stock markets.

During the next recession; however, stocks will fall precipitously as corporations with historically high debt balances will not be able to continue their current growth trajectory using cheap central bank fiat money.

At this time, there will be nothing to push the stocks up as investors flee into gold and other physical assets looking for safety and returns. At this point, gold will reach much steeper heights against the stock markets, while the dollar continues to fall relative to other currencies.

This article was written by

Robert Kientz profile picture
Author of DropShadow and founder of Gold Silver Pros @ 6-7 Virtual Precious Metals Summit: have been analyzing the precious metals markets for over 10 years, and have built relationships with many experts in the field which include miners, geologists, and analysts. My site is dedicated to providing you professional research on the precious metals market.I have spent over 20 years working in the technology sector as both an IT and information security professional. I have a Masters degree in Information Assurance & Security, a Bachelors in Business with an MIS concentration, and an Associates in Applied Sciences in Unix Administration and Cisco Networking. I began my investing career over 16 years ago while completing several investment advisory exams - Series 3, 6, 63, and 7 covering the commodities, insurance, and stock markets. After watching the 2008 recession calamity, I began deep research into the economy and markets where I found solace in the writings of Austrian economists whose theories accurately predict and analyze the issues surrounding currencies and financial crises. I then wrote a book, based upon my own extensive research, entitled Dropshadow: The Truth About the Economy, which is available on Amazon.Shortly after writing the book, I began writing for Seeking Alpha and other online outlets on economic and financial topics and issues. I have focused my market research writings on Seeking Alpha since 2018.In 2018, based upon my deep research into the precious metals, I launched my personal newsletter service for investors @ where I provide precious metals investors with research updates and insider intelligence in order to help them better invest in those markets.

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.

Additional disclosure: I own gold and silver.

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