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Can the Gold Bull Market and the Bull Market in Stocks coexist?



August 18, 2010 – Comments (9) | RELATED TICKERS: GLD , SPY , IAG

They can. They have been, and they will...

I don't know about you, but based on the posts I see almost daily, it looks like like 99% of the Fools who are bullish on gold are also very bearish on stocks, and by the same token, 99% of the Fools who are bullish on stocks are also very bearish on gold? 

I even remember seeing posts where these two groups of Bulls (or Bears, depending on how you look at it) got into very heated debates and ended up calling each other some pretty bad names.

Fools, there is no need for that. Belive me. Just look at the facts.

Ever since the Bull Market in stocks started back in March of 2009, both of these Bull Markets lived right next to each other. Happy as can be. No arguments, no fights, no nothing. Just happy to steadily go up.

Let me show you what I mean (a picture is worth a thousand words):




Do you see it? Don't these two lines (GLD tracks Gold, and SPY tracks S&P 500) look like a very happy, harmonious couple going up almost hand in hand? They do, don't they?

So if these two Bull Markets are so happy, and have no beef with each other, why do we (with our "theories", which btw. have failed so many times) have to try to create a problem where there is no problem?


So don't be a divider, be a uniter. And try to profit from this trend (by acknowledging that the market is always right)...

Good Luck Fools!


With this post, and the chart above, I'm not trying to show that the Stock Market is outperforming the Gold Market. I know that Gold Market has been kicking Stock Market's ass for the last ten years.

I just think there is an obvious pattern of these two bull markets being able to coexist (because of what's going on in the world today), which I think will continue for another two years or so. Maybe even five.

I'm not saying they both will go up during the same week, or even the same month or quarter, but I think when we look back at 6, 12, 18, 24-months charts, we will see that both continued going in the same direction. Up...

9 Comments – Post Your Own

#1) On August 18, 2010 at 1:00 AM, dragonLZ (90.78) wrote:

Let me also add that based on "my" eleven twenty-one method, best gold plays are the following two companies: IAG (Iamgold Corp) and AUY (Yamana Gold Inc).

Here is the chart showing their performance against GLD and SPY since March of 2009:


As you can see, IAG has been doing quite well (which I expect to continue) while AUY has been underperforming both SPY and GLD. I expect that to change soon.

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#2) On August 18, 2010 at 1:17 AM, dragonLZ (90.78) wrote:

And one more thing: I focused on gold stocks as gold is really the "hot subject" and has a very large fanbase.

However, one can't forget silver and silver stocks, which, since March of 2009, have been outperforming gold stocks (and S&P 500) by quite a bit.

Here is the chart showing the best silver plays (HL - Hecla Mining, SLW - Silver Wheaton, and SWC - Stillwater Mining) vs. IAG, AUY, and SPY:

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#3) On August 18, 2010 at 2:52 AM, JaysRage (79.64) wrote:

It's actually a pretty easy scenario.   All it takes is a weak dollar.   Anyone who believes in the hyper-inflation scenario will walk easily along with you on this. 

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#4) On August 18, 2010 at 3:09 AM, DarthMaul09 (29.00) wrote:

Stocks, Oil Moving in Lockstep


From Houston to New York, energy traders and commodity investors are watching a new and unusual market phenomenon: a persistently high correlation between oil and stocks.

Crude oil is now influenced more by the stock market than by its own inventory levels or demand patterns. Lately, that lockstep has reached an extreme, with the correlation between crude oil and the Standard & Poor's 500-stock Index hovering around 70%, doubling the average of 34% since 2008.

Oil and stocks aren't supposed to swing in sync with each other. Unlike stocks, which are priced off corporate earnings, oil is usually driven by ...


JULY 12, 2010

Small Investors Flee Stocks, Changing Market Dynamics


Many individual investors were tiptoeing back into stocks in the spring. Now, they're running for cover again. ...


The increased correlation between different markets and commodities may be due to two recent observations.  First, there may be fewer investors, which each controls a significant amount of capital and who are making similar bets based on similar models.  Second, the main investment play now is risk, which means if you want to avoid short term risk you go into the US dollar, which was the only investment which gained value in late 2008.  If you are willing to accept risk, then gold, commodities, and stocks in general becomes the generic risk play.  Rapid computer trades and ETF just help facilitate this on/off-trading pattern.




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#5) On August 19, 2010 at 8:50 AM, floridabuilder2 (98.57) wrote:

Just for you Dragon I closed my ITB position.  You can thank me later for the great call.  I still believe the market goes lower and jobless claims are showing that, however, homebuilders don't have as much downside left.  I have a few more red thumbs to flip to green on the homebuilder front. 

This run through November will mark the bottom of housing.

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#6) On August 19, 2010 at 10:08 AM, dragonLZ (90.78) wrote:

I'll keep that in mind, FB.



Btw., I still belive market is not gonna re-test July '10 low.

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#7) On August 19, 2010 at 10:16 AM, outoffocus (24.11) wrote:

Great point Dragon!

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#8) On September 12, 2010 at 4:14 PM, EllenBrandtPhD (< 20) wrote:

There is a very big difference between "most people in the sector" and "most spokespeople who pretend to be pro-gold appearing on Bubblevision or - alas - even writing for some major gold sites."

In the view of at least 3/4 of those who are true Gold Bulls, Gold is not a Fear Sector. 

Gold is, in fact, among the preeminent Growth sectors, reflecting the rise in economic prominence of the most historically Gold-centric regions of the world: China, India, the rest of Asia, Africa, the Middle East, Latin America.

Gold reflects nothing less than the Second World Industrial Revolution, as more than one-half of the world's population strives to attain the bourgeois status of the US, Europe, and Japan.

And Gold reflects the end of the dominance of the Dollar in the world's reserves, leading sooner than most imagine to a much fairer, less volatile, more sustainable world currency and economic regime.  



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#9) On September 22, 2010 at 1:51 AM, dragonLZ (90.78) wrote:

Thanks outoffocus (sorry I'm so late with this, didn't see your comment until now).

Thanks for commenting, Venerability. I'm sure many people agree with you.

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