Stocks, Gold & Silver
Sometimes a picture can bring things into focus in a way that words cannot. We see that in the charts below comparing stocks, gold and silver to one another over the past 10 years.
The first chart illustrates the Dow, Gold and Silver plotted against one another from 2006 thru 2009. A few interesting things to note:
- In 2008, all three sold off in sympathy to one another
- The broad market decline preceded that of the metals
- The contraction in the metals was short lived – half that of the broad market
- Gold’s drop was equivalent to that of the broad market, whereas silver’s drop equated to that of the DOW
Chart two also illustrates the Dow, Gold and Silver plotted against one another picking up from chart one above, 2009 thru present.
- Note the sharp increases in the metals within a short time frame – especially silver, up more than 5 times in just over two years.
- Note how the silver price goes nearly parabolic in the first 4 months of 2011. Gold experienced the same in the middle of the year. One should have known that such a rise was unsustainable.
- KEY: Pay special attention to the series of lower highs and lower lows in both the gold and silver charts. Until this pattern is broken, a decline (or flat market) will continue.
- Despite the strong showing we have had in the metals of late, gold must have strong closes above $1184 and silver above $16.12 in order to speculate that we have turned the corner.
Finally, Forbes reports that bear markets in stocks last an average duration of 18 months with a 40% drawdown, which roughly equates to what happed in 2008 (see the first chart). If that is the case, we could see the DOW at 10,900. Would the metals participate, or rally against the market as a safe haven?
– John Fisher, President, Fisher Precious Metals
