Guest Post: The End Of The Gold Bull Market

Tyler Durden's picture

Submitted by Casey Research

David Galland, Managing Director of Casey Research, interviews… David Galland.

Q. With gold and gold stocks on a tear, does Casey Research still recommend holding 1/3 of a portfolio in cash?

A. The answer depends, of course, on what country you are currently sitting in. Were I sitting in the eurozone, I would have already moved much of my safe-harbor cash into the “resource” currencies such as Canada and Norway… i.e., countries that are rich in the natural resources that the world needs and will always need.

If my derrière were resting in a seat planted on U.S. soil, as it is, and I didn’t plan on doing any significant overseas spending, then I would feel relatively comfortable – for the time being, with a larger than usual allocation to the dollar. But I would have been diversifying into the resource currencies as well.

Q. Hold the fort, dude – how can you write frequently about the demise of the dollar and yet be “relatively comfortable” holding the stuff?

A. In a nutshell, the monetary inflation, quantitative easing, and insane spending of the U.S. government, emulated by countries around the globe, have set the table for a large serving of currency depreciation down the road.

Once that depreciation begins to appear in the form of price appreciation, we’ll look to trade our greenbacks for more in the way of tangibles – probably more gold… maybe real estate in a good location, location, location… maybe more silver… maybe deep-value energy stocks… maybe antiques… maybe some of all of the above.

For the time being – because price inflation is not out of control and yields are so low – there is little real carrying cost to holding a larger allocation to cash, and the flexibility and security of having cash is a big plus. 

Q. What about gold and gold stocks today?

A. Gold is sound money. Always has been, probably always will be. In the sort of crisis now underway – a crisis that to no small extent is now focused on sovereign fiscal and monetary excesses – gold has a particularly important role in protecting wealth.

If you don’t own it, start accumulating it, preferably on the inevitable dips. If you do own it, hold it and consider accumulating it up to somewhere between 20% and 30% of your portfolio, though the exact amount will depend on factors such as your cash flow needs, personal debt obligations, your age and work status, etc., that we can have no way of knowing. 

One of the nuances in answering this question has to do with deciding what form of gold to own. While we like physical gold held in a safe place, you don’t want to go overboard, because things can happen. For instance, robbery, or even a house fire that melts your wealth back into the dirt.

In addition, at some point the gold bull market will end, and when it does, the scramble to sell will likely overwhelm the coin dealers to the point where they literally take their phones off the hook. That creates the potential for big gaps down in the price between the time you decide to sell and are actually able to sell. Mind you, I don’t see that being a concern anytime soon – but it’s always worth keeping in the back of your mind.

There are a number of other bullion alternatives – a big positive being that many are easy to buy, hold, and sell – including allocated and unallocated gold accounts, electronic gold, gold ETFs, and so forth. Some are better than others – and all are worth understanding before making investments. Our Casey’s Gold & Resource Report is a good source for this sort of info.

Generally our recommendation is to hold your gold in a variety of investment vehicles as that will mitigate the risks of having too many eggs in one basket.

Turning to gold stocks, savvy investors will already be well positioned in the best of the best. And will own many positions risk-free, having already recaptured their original investment. If that is the situation you are in, and you really understand the companies you are invested in, then at this point either hanging in for the big upside or trading the surges and dips makes sense. If you are new to the sector, I wouldn’t chase the stocks just now – but rather put in stink bids – i.e., 10% to 20% below the current market, and look to get filled on a correction.

If you are new to the gold stocks, or risk-averse, then look to build a portfolio of large-cap gold stocks such as we cover in Casey’s Gold & Resource Report. Those will attract a lot of attention from the public at large, and from institutions, as the bull market gathers steam.

If you have experience with gold stocks, and a higher tolerance for risk, then you may want to focus on the small-cap Canadian explorers and developers. Those juniors have amazing volatility and, when the news is good, the upside can be breathtaking.

Regardless of the approach you take, don’t chase stocks as they move higher – but look to build your portfolio on dips over the next few months.

The idea is to get positioned before the underlying price of gold reaches a level where the public starts to come into the sector in a big way – at which point, if history is any guide, the early investors will make stunning returns.

Q. At what price do the gold stocks catch fire?

A. Some years ago, we had someone spend the better part of a week in a musty storage room full of old Canadian newspapers, paging through past issues and recording the price and volumes of the gold stocks during the last big run-up, in the 1970s. We then compared that data to the gold price in inflation-adjusted dollars in order to determine the price when the broader investment public began piling into the gold. The number worked out to about $1,250 per ounce in today’s dollars. In other words, when gold decisively takes out $1,250 an ounce and holds above that level, if history is a guide, we may start seeing the average guy on the street – and the institutions – pile into the stocks.

Of course, while interesting from an historical perspective, that analysis has no scientific basis. The key point, therefore, is that during the last big gold bull market the public wasn’t involved in the gold stocks when they should have been – in the run-up phase – but rather only piled in after the price of gold bullion soared, relatively late in the bull market. So far, the average Joe and Jill are just not in this market. But they will be.

Q. How high do you think gold will rise?

A. At our recent Crisis & Opportunities Summit, an attendee asked how high we thought the dollar price of gold would reach in this bull market.

My response was that there really is no way of actually forecasting that number, for the simple reason that, in a fiat currency regime, the underlying unit of valuation is so intangible. Let’s say you lived in Zimbabwe some years ago and owned an ounce of gold. One day your ounce might be worth 1,000 of the local currency units. A year later, it might be 1,000,000. Or even 10,000,000,000.

While the U.S. is no Zimbabwe – at least not yet – its currency is just as intangible, for the simple reason that the government can print the stuff pretty much at will. To say that gold will go to $5,000 in the current crisis is really just another way of saying that the dollar currency unit will fall by some significant degree. But, given the uncertainty in the economy and the unknown of what actions the government and the Fed might take next, we really can’t know how much purchasing power the currency unit will lose in the months and years just ahead.

To date, the government has been extraordinarily – breathtakingly – willing to abuse the dollar. They have largely gotten away with it so far, but that certainly doesn’t mean they will get away with it forever. When the time comes for the piper to be paid, we suspect he’ll be paid pennies on the dollar… which could easily result in gold trading for $3,000, $5,000, $10,000 per ounce – but, who knows, maybe even $10,000,000,000.

The point is, given the choice between dollars and gold, you are far more likely to preserve your wealth over the duration of this crisis with gold.

Q. Is the gold bull market getting old? How much longer can it last?

A. Having been around and actively involved in hard assets – as the editor of “Gold Newsletter” and the conference director of the New Orleans Conference – during the last big gold bull, I hope I can provide some useful perspective.

For instance, I can well recall when, in late 1979, all of the many gurus of the day were predicting gold would keep going higher and higher still. Well, as we all know, it didn’t.

What’s interesting about this time around is that there is almost no scenario we can envision that is going to kick the legs out from under the gold market – at least not anytime soon. In contrast, in the late 1970s, the gold bulls coulda/shoulda seen that the Fed had a lot of room to act – i.e., by pushing up interest rates – in order to tackle the price inflation that was the key driving force in the soaring gold prices of the time.

Today, the situation is profoundly different. Starting with the fact that this is, at the core, a debt crisis. And the one thing you can’t do in a debt crisis is to encourage interest rates to rise. Look no further than Greece for that lesson.

So, we have an unprecedented monetary inflation, truly out-of-control sovereign spending and debt, unprecedented levels of private debt, unprecedented trade deficits, a massively overbuilt and overpriced post-bubble real estate market, and, importantly, near historically low interest rates.

So, we have to ask ourselves – other than continuing to exercise its powers of fiat money creation – what ammunition does the government have at its disposal to address the structural problems of today’s economy? And, of course, actually creating more money and more debt isn’t addressing the structural problems, it is compounding them.

Of course, the government can default on their sovereign obligations – an option I think we’ll see Greece and others of the PIIGS take, and probably fairly soon.

They can also continue to inflate, which we expect them all to do.

And they can… no, actually, I think that about sums it up: default or inflate. In either scenario, gold is going to be seen as the ultimate safe harbor.

Q. Won’t the government see gold as a threat to its fiat currency and try to do something about it?

A. Of course, governments might try any number of stunts that could affect gold. For example, raising margin requirements to curb playing the markets with leverage, or even attempting outright confiscation.

All we can do is to monitor the situation closely and try to anticipate their next moves in order to get out of the way. A number of people I know have opened safety deposit accounts in other countries as one way to hedge their bets against confiscation. Others have bought numismatics – but be careful on that front, because that can increase illiquidity.

It is not out of the question, in my view, that before this is over, we could see a revaluation of gold in order to re-link the U.S. dollar to it – because sooner or later, as the crisis reaches its climax, something is going to replace the fiat currencies – but at this stage it’s impossible to guess what that will look like. If we did see a return to a gold standard, then the government could actually be responsible for sending gold up by many multiples.

Back to the present, at this point I can’t see anything that is going to derail this bull market – but I do see a whole lot of things with the potential to send it into the stratosphere.

Q. Thank you for your time.

A. My pleasure. Always happy to be of help.

Q. You’re kind of strange, talking to yourself and everything. You know that, right?

A. Sometimes I wonder. 

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Mako's picture

I expect huge bounces in all indexes including gold and in both directions.  As far as inflation, I am sorry it's gone.  Gold will trade on two factors 1.) destruction of the system 2.) general uplift as generated by the rest of the market(ie bounces within the cycle).   By the time this is all over you will see swings in gold of $100s in hours.

Eventually the credit system will collapse, with it production will collapse, then you will have decades and decades of negative or near zero growth, production will come to a stand still. 

If you think you are just going to cash at your gold and live like a King you are in for a rude awakening. 

anarkst's picture

"Eventually the credit system will collapse, with it production will collapse, then you will have decades and decades of negative or near zero growth, production will come to a stand still."

If I were you, I'd take it a day at a time. 

Mako's picture

Eventually you will have to take it a hour at a time, then it will have to be minute at a time... the ones that get liquidated will be taking it seconds at a time until their seconds are gone.

spartan117's picture


Been following your posts for awhile now and appreciate what you have to offer.  Do you see a timeline in your "The Road" scenario?

God, I hope I don't have to eat my thumbs.

Mako's picture

Could be one day if the right derivative goes poof, or slow death for decades, eventually the financial system you know of right now will not exist this time.  This was is magnitudes larger than the previous peak wave. 

If I were to throw a wild guess out there, end of 2012 we will probably not be talking about much of this.   I don't think that will be the bottom, the bottom will be decades in the making.  IMHO


Oracle of Kypseli's picture

We love and respect Mr. Casey's opinion.

However, Mr. Casey can only make money during fluctuations and uncertainty. Gold hovering at $250 or at $1250 does not give a feeling of uncertainty.

Thus, people will not read his columns.

Nonetheless, many of us do need his opinion when uncertain. (Circular logic, but true) we are mere humans



trav7777's picture

What the fuck would the point of cash be in such an apocalypse, Eeyore??

You zombie apocalyptics make me laugh; you are nuttier than the most ardent goldbugs.

By the way, ZERO GROWTH does not equal PRODUCTION COLLAPSE.

YOU are the problem, because YOU cannot see past fuckin paper and credit!  The world does NOT need to freaking END because of line items on an accounting ledger.  We still have 80+mbpd of oil, the lights will come on, the sun will still come up.  GFD, life goes on, even in Argentina during a collapse, even in Zimbabwe, even in Beirut during the civil war.

Christ almighty all this Douchingerian fretting over the end of goddamned PAPER and ponzis.

GoodBanker's picture

Trav, you and Denninger both know that all the gangs in the world will unite and systematically rape and pillage everyone, just as they have longed to do since the days of their ancestors, the Mongols. Mongols vs. Rome = Mongols. Gangs vs. American people = Gangs. See, Denningerian logic at work. In the event of a currency collapse, the gangs will immediately activate their telepathic abilities and communicate as an organized, efficient collective while the rest of us panic in disarray, shooting blindly at our neighbors and school children. Please. Denninger needs to get the hell out of the yuppie bubble he's lived in for the whole of his adult life and experience REAL LIFE. A lot of these "gang bangers" - not the fun kind - are just disenfranchised youth looking to make a buck; few if any of them have ever had to fight for food, and most would be just as perplexed as John Q. Taxpayer if they were forced to enter an upper-middle class neighborhood in search of sustenance.  

Seriously, I get sick to death of the paper bugs CONSTANTLY asserting that the elimination of a medium of exchange less than 40 years into its infancy will result in a global upheavals and nuclear warfare. We're more likely to start a nuke war because we let narcissistic imbeciles have the keys to the ignition, not because the bankers are sticking it to us the same way they have since the days of Abraham. Say it with me, everyone: ARGENTINA. There, doesn't that feel better? They still eat down there... drink and snort a bit too, if you catch my drift. I would note, however, that they are not universally blessed with an endless supply of $5 lattes, flat screen television sets (though the Chinese STILL trade with them), and Hummer H2s. Big freakin' deal.

I actually do side with Denninger on a number of issues, one of which is the inevitable failure of MANY police forces throughout the country to maintain popular support. Of course, I see this as a result of an impending revulsion with standing authority figures once the public wakes up to a fraction of the crimes perpetrated against them, not as a result of millions of heartless gang members laying waste to anything in their paths.

bernorange's picture

Argentina got bailed out by the IMF.  Should the dollar collapse, who's going to bail us out?

BumpSkool's picture

yeah - "production will collapse" .. and with it Gold production too. I'll be on the beach with the Gold nuts  ... livin' it up

Spitzer's picture

Fuck am I ever sick of comments like this.


What if you have money that you don't ever plan on spending ? 

If you would need to sell your gold in 6 months to live off of then you are not wealthy enough to own any in the first place. Some people have enough cash to live for a year opr 2 but might actually want to preserve their fortune during a stagflationary depression.

Whizbang's picture

"The point is, given the choice between dollars and gold, you are far more likely to preserve your wealth over the duration of this crisis with gold."

Wealth? Who the hell has any of that lying around?

saulysw's picture

Hey! I got myself a bottle of Berri Vodka and Absynth ("Green Fairy") and am trying it out. I can see what you are getting at, it makes a potent brew. Strange mix of tastes too. I doubt it will become my favourite, but it is interesting. I think I'll feel the effects by the time glass 3 goes which point you probably won't hear from me as the Captch question will become impossible to solve, even with a calculator.

repo 105's picture

The lack of anything hardly at all in the slight bit negative being posted or written regarding Gold throws up a huge red flag. I remember looking at building lots in Water Color on 30A for $1.2 million no where close to the beach. They ain't making no more of them I was told. As luck had it, I passed, way too much good news. Let the flaming begin.....

Raymond K Hassel's picture

 You just aren't looking in the right places - check out John Nadler on for a nice aggregation of daily gold bashing - I wish that pussy would open up a comments section - I agree with your post though - it worth the effort to find contrary views to build perspective.

akak's picture

Jon Nadler is the quintessence of arrogant, disingenuous and dishonest bankster-associated sociopathy.  Read him at your own disgust, and trust anything he has to say at your own financial (and moral) peril.

goldfreak's picture

John Nadler? ha ha, he's probably in here trolling around bashing gold.

akak's picture

Why not?  He's already been outed by many different individuals, trolling and posting viciously anti-gold posts in a number of other forums, notably on MarketWatch and in Kitco's own forum --- before he was banned by his own company's moderators, LOL!

e_goldstein's picture

Ha! Bagdad Bob (Nadler) flagged your posts as junk.

akak's picture

Hey Jon "Baghdad Bob" Nadler, I've got a news flash for you --- the enemy tanks are rolling into your city of paper ponzi corruption, and they are made of GOLD!

Spitzer's picture

Shorting gold was the hot topic on Fast Monkey today

DoChenRollingBearing's picture

If gold goes down enough to make my gold only 5% of my wealth (I am about 6% now), then I'll just buy more.

Insurance against .gov and best wealth preserver.

Eventually all going to my kid (grandkids?).

JW n FL's picture


Limited Gold Sales

Limited sales of 12,965,649 fine troy ounces of gold that was acquired by the Fund after the

second amendment of the Articles of Agreement may take place on the basis of prices in the

market. A key element of the new income model is the eventual creation of an endowment

with the profits from gold sales.

jomama's picture

for someone who loathes gold as much as you do, you never miss a 'gold' topic to type in your 2¢ worth...

JW n FL's picture

I do try to post information that almost all can find useful...


As opposed too.... Bitch, Whine and / or whatever it is you offer...


Instead of bashing me sharing useful information, how about you be a sport and read something and share any interesting facts you may find... so that the community here can benefit, if we all read and share then maybe we can be better versions of ourselves for the  knowledge gained?


Do you know how many Metric Tonnes of Gold the IMF plans on flooding the markets with? while the markets are not at $1,250 an oz.?


***** "On September 18, 2009, the IMF's Executive Board approved gold sales strictly limited to 403.3 metric tons, representing one eighth of the Fund's total holdings." *****


See sharing can be fun and helpful to your fellow man... I hope that you, can better get into the spirit of things... for the benefit of all!

Hephasteus's picture

Oh look. The IMF is going to pull the 400 metric tons of gold out of it's ass trick again. I'd lease that but gold is heavy and the mileage would suck. I wonder if they do parties. Everyone should see the latest tired old IMF stupid pet tricks.

BumpSkool's picture

+100 ..right on man ... moreover cut the "flood the market" drama...IMF sells zero IN the market...they sell 100% OFF the market in private sales

geminiRX's picture

The IMF has gold my ass. Sprott offered to buy the last lot that went on sale and the IMF refused the offer. Hmmm....wonder why?

Selah's picture

Over half of that Gold was sold to India, Sri Lanka, and Mauritius. Sprott wanted to buy the remaining amount but his money was refused as well as that of another bidder.

They wanted to take possession of the Gold, rather than just get a receipt.

Gold...Bitches's picture

and thats before the issue as to whether the IMF has any gold beyond that 400 tons and is just a ledger entry.

Spitzer's picture

Hey wise guy, the IMF gold sales is what sparked the previous rally to $1225.

Pegasus Muse's picture

I doubt the IMF has any gold. The only thing they're selling is lies and BS.

They can prove me wrong.  They can do an independent audit/assay of their "holdings".


mitack's picture

Fuck off yomama, you are fooling noone.

JW, thanks for the insight and pls dont feed the trolls.

Apocalypse Now's picture

You and JW are fooling no one.  Troll.

JW n FL's picture

How is my posting sourced and sited material "fooling anyone"?


What am I fooling people for? and how by offering information to what I see as a continuing manipulation of pricing for Gold by the powers that bee... (pun intended, don't get stung)


Are you in politics? double talk, trash talk without making a point of any kind? Go suck Palin's dick! Pro-Lifer!

LeBalance's picture

Does a sane man answer using language like this:

"A. In a nutshell, the monetary inflation, quantitative easing, and insane spending of the U.S. government, emulated by countries around the globe, have set the table for a large serving of currency depreciation down the road.

Once that depreciation begins to appear in the form of price appreciation, we’ll look to trade our greenbacks for more in the way of tangibles – probably more gold… maybe real estate in a good location, location, location… maybe more silver… maybe deep-value energy stocks… maybe antiques… maybe some of all of the above."

Once it begins to appear that is when we should jump? /roflmao!/

Buying real estate (an asset which has been road pizzad!)? /oh my!/

Maybe antiques? lol, maybe pocket pool?

This is a professional? /////we'll can you, Doug.  Thanks, have a great day.  Door's over there.  Have a great flight.  Nice talking to the wife.  Sure I got your card.  Don't mention it.  Yup, will talk soon.////

akak's picture

You know, LeBalance, precisely the same thoughts went through my head while reading the above portions of the "interview".

I may not be a Wall Street trader, but even I know that the wisest and most profitable moves are only made BEFORE they become the obviously correct ones to Joe Sixpack!  Casey is asking us to make sure that we close the gate AFTER the horse has bolted from the barn.  And THIS is supposed to be serious investment advice?

mitack's picture

Joe6Pack will never figure out what is going on.

He will only "feel" that something has gone wrong

when he cant get his, well- 6Pack...

If you equal yourself with J6P go find another forum.

On a separate note I agree with your stance that

this "research" stinks...

Goods's picture

This interview is utterly useless. We need to ask Leo what he thinks.

Q:So Leo is gold a good place to put your money in?

Thanks for quoting me, and as far I can tell, calm is restored and the markets are heading up again. Not good for gold.

Q:And how will this calm be restored?

calm will be restored when the trillion dollars starts being felt in the financial system.

Q:So which sector would you recommend investors put their money in?

Buy Chinese solars now!


Q:But is China a safe place to invest? Jim Chanos has called it the mother of all bubbles, with their wasteful spending and zombie malls.


There is no more China and America, it's Chimerica. Fortune 500 companies are deeply embedded in China. And China still needs the US consumer to grow their middle class.



Q: So China is the future?

Buy Chinese solars now! Thank me later!

And thank you Leo for sharing your precious time with us today!

akak's picture


But you forgot the gratuitous photos of scantily-clad women to conclude your Leo interview!

akak's picture

(double post --- damned slow website!)

mitack's picture

The website is just fine.

Thats just your junkbox full of worms and malware...


akak's picture

Actually, this ZeroHedge site crashes and locks-up on a daily basis.  I'm not sure why, but it can be impossible to get on for 20 or 30 minutes at a time lately.

DosZap's picture


ditto's......................crashes, offline for sometimes hours.