Gold bear markets end with a 20% surge

 

The gold bear market table shows a history of gold bear markets. They are all different from one another and occurred for a number of reasons. This time, it was relatively simple – at $1,900, gold had run out of steam and the price got ahead of itself. Post credit crisis QE failed to bring on inflation and confidence in the financial system was restored – well sort of.

The bear since 2011, has lasted for 1260 days which is relatively long, but not the longest. That occurred between 1987 and 1993 and lasted for 1913 days. My observation is that any bear rally that exceeded 20% has led to the end to the bear market. Anything less than 20% has seen new lows. There is one obvious exception as highlighted in the table. In 1980, gold collapsed from dizzy heights and had a powerful counter rally of 48%. That’s the exception. It was more of a crash from an exuberant high and therefore the beginning of a bear market. That saw a counter rally from a large move during a period of extreme volatility. My 20% rule is merely an observation. It’s not a law set in stone nor is it intended to be.

Since 2011, all the bear rallies haven’t seen a 20% move until now – and even this one hasn’t quite made it. If we say the low was approximately $1,050 in December, then a 20% rally implies a convincing close above $1,260 would mark the turn. So far gold met resistance at $1,260 on 16th February and again today (4th March 2016).

I’m just making the observation that 20% has a good history of being the line on the sand. A bull hasn’t necessarily followed, but the price has never made a new low following a 20% rally – 1980 excepted. The chart below shows this current rally against previous gold turn rallies.

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bear rebased