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What will confirm the claim that this is a generational bull market in precious metals?

*Dow Theory Letters, Richard Russell, April 7, 2006

“I’m going to start with a rather unusual chart of gold. It’s a monthly chart going back to 1999, the year when the great bull market started. I want to show how gold tends to move up in increments of 100. Note how at each hundred level, 300, 400, 500, gold whipped back and forth — until it finally climbed to the next 100 level.

Once above 400 the gold bull market began to accelerate, and gold hardly paused as it climbed above 500 to the 550 level. At 550 something new was added. I had written that from its 1980 bull market peak of 850, gold headed down in a long bear market that ended in 1999 at a price of 250. The bear market took gold down 600 points. And this is where the 50 Percent Principle comes into play.

The 50% Principle should only be applied very carefully, and only during major (in time and duration) moves. The entire bear market decline consumed 600 points. Half of 600 is 300. We add the 300 to the price of gold at its bear market low, and we get — 250 plus 300 or 550. Thus, 550 is the halfway or 50% level of the entire bear market decline.

The 50% Principle states that if the gold can recover half of its bear market losses, and stubbornly remain above the halfway level — then the odds are that gold will continue higher to test, and probably surpass, its old high. Thus, gold must now hold above 550 or the halfway level. If gold can hold decisively above 550, it should, in due time, rise to test, and probably surpass its old high of 850.

Once breaking above 850, there’s no telling how high the great bull market might carry gold. My only thesis here is that I believe gold is fated to go further on the upside than anyone is thinking about at this time. Great bull markets have a habit of going further on the upside than anyone believes possible.


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

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