Will Next Market Crash Be Like 2008 Or 1973? History Predicts An Amazing Run In Gold & Gold Stocks

Palisade Research's picture

Gold investors are worried about record high valuations in the S&P 500, despite the fact that gold stocks have shown a negative correlation to the general equities since 2011. The reason for this fear? 2008.

The market crash of 2008 did not just hurt the S&P, it hurt real estate and gold equities. The sell off was brutal. So was 2008 an isolated incident or does a crash in general equities always spell doom for gold and gold stocks?

We examined five previous bear markets starting in 1973 in the S&P and looked at the performance of gold and gold stocks.

The End Of Bretton Woods & The Oil Crisis: January 1973 – October 1974

The stock market crash of 1973 was spurred by overwhelming public debt and inflation – the result of generous social programs and the Vietnam War. President Nixon abandoned the Bretton Woods system in 1971, and ended the convertibility of the US dollar to gold. The dollar had become overvalued, despite its gold backing decreasing by over 60%. A deteriorating economic situation was exaggerated by OPEC’s oil embargo, initiated when the US declared its support for Israel during the Yom Kippur War.

By the end of this recession, the S&P 500 was down 48% while gold gained 139% and gold stocks gained 189%.

The Iranian Oil Crisis & Lingering Inflation: November 1980 – August 1982

The 1980-1982 bear market was incited by a second oil crisis, this time due to decreased production during the Iranian Revolution of 1979. While global supply only decreased by 4%, the first oil shock was still fresh in everyone’s mind and crude oil prices more than doubled. This crisis was followed by the Iran-Iraq War in 1980, where oil production ceased in Iran and significantly reduced in Iraq. The US was also feeling the lingering affects of inflation, and raised rates accordingly.

By the end of this recession, the S&P 500 was down 27% while gold lost 46%; gold stocks lost 64%. Gold’s loss in this recession was due to astronomical interest rates, reaching a historical high of 14% from June to October 1981. The drop was also exaggerated by the incredible gain gold witnessed leading up to period. Gold increased 436% between 1974 and 1980.

Black Monday & Iran…Again: August 1987 – December 1987

After the 1980-1982 bear market, the US had a period of recovery and rapid expansion. The S&P 500 gained 230% from its low in 1982, and uncertainty began to rise. This doubt was once again exaggerated by oil, with reduced demand and increased production resulting in an oversupply in the world market. Oil prices dropped by more than half in 1986 alone, leading to the collapse of OPEC. In October 1987, Iran fired a missile and hit an American supertanker, and the next day another. On October 19, 1987, the S&P 500 dropped more than 20%.

By the end of this recession, the S&P 500 was down 34% while gold gained 6%. Gold stocks were down 21%.

The Dot-Com Bubble & 9/11: March 2000 – October 2002

The 1990s saw the exponential growth in computers and internet usage. The Information Age was born. Institutions and retail investors alike began eagerly investing into anything dot-com related, and capital was invested without traditional investment metrics. High-risk stocks also saw an additional inflow of capital due to the due to the Taxpayer Relief Act of 1997.

The telecommunication sector jumped head first into the trend, and upgraded its networks to service the growing internet users. Expansion was funded heavily with debt, however, the investments in infrastructure was simply not justified by projected returns.

Eventually capital dried up, and many telecom companies were forced to declare bankruptcy. Dot-com also fell heavily. The events of September 11 were the nail in the coffin, and the NYSE was forced to suspend trading for several days.

By the end of this recession, the S&P 500 was down 49% while gold gained 12% and gold stocks gained 28%.

Global Financial Crisis – October 2007 – March 2009

Our most recent recession and a story that should still be familiar in the minds of our readers – The Global Financial Crisis of 2007 and 2008. It was created by greed and leverage, beginning with the subprime mortgage crisis in the US, before developing into an international banking crisis. Investment banks such as Lehman Brothers simply took on too much risk, and central governments were forced to bail-out the bankers to prevent a full-fledged collapse of the world’s financial system. Nevertheless, the world did see what was dubbed the Great Recession, which also resulted in the European Debt Crisis.

By the end of this recession, the S&P 500 was down 57% while gold gained 26%. Gold stocks did not fare so well, down 46%.

Repeat Of Past Mistakes – Near-Future To ???

During four of the past five recessions, gold was up significantly. Gold stocks were in the green during just two of those occasions. The fact of the matter is that gold stocks are still equities. When equities sell of, investors rush to cash and in many cases gold. This is exactly what happened in 2008, where gold posted a 26% gain. Gold stocks marginally beat the S&P, but still witnessed significant declines.

There is no clear magical formula for a recession, however, it appears there are some common themes. First, what goes up, must come down. There have been run-ups in the stock market prior to each recession, and eventually investors take their gains or simply run out of capital.

Interest rates play a large factor. High interest rates stifle economic growth, but if too high, also suppress gold prices as investors would rather invest in something that pays interest.

Lastly, recessions are initiated or exaggerated by global unrest.

Since the last recession ended, the S&P 500 is up 255%, while gold has gained 33%. Interest rates have also increased, as the Fed maintains a hawkish stance for the near future. So, for the time being, gold prices are likely to remain depressed.

Gold stocks for the year are stagnant. And this may be because gold investors are still scarred by the previous recession, where gold gained but gold stocks fell by almost 50%.

It is our opinion that the situation today best mirrors 1973, rather than 2008. 1973 was spurred by overwhelming debt and inflation. It is no secret that the world’s governments will continue printing money to fund growth and to service debt. But like clockwork, eventually something gives. We foresee the debt bubble finally popping, and the coming turmoil exaggerated by the foreign policies of the US Government.

The recession of 1973-1974 saw gold prices gain 134% and gold miners increase 205%. In the next market crash, history is favoring a similar situation and gold will be the safe haven from inflation and uncertainty.

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Maestro Maestro's picture

Wall Street will flee Wall Street (aka mining stocks) when the fat lady sings.

If you buy mining stocks now, you'll just guarantee to be more destitute then than you are now.

When the system collapses, ALL of it goes. That includes ALL paper nonpromises like bonds, currency, futures, and paper gold of all kinds, which includes mining stocks.

Mining companies are owned and/or controlled by bankers and only constitute fraudulent vehicles to deliver their product, gold and silver, to market at cost or below cost, for the sole purpose of suppressing precious metals prices.

Mining companies' spurious profits depend on their hedges performing, thus on the price of their product, gold, going down, not up. (Said unlawful and illusory profits also are contingent upon the loans and fraudulent financial schemes bestowed upon the mining companies' balance sheets, by the bankers.)

If gold goes up, that means this toxic gravy train has been fatally derailed.

Ask yourself,

Why the bankers are going to print money out of thin air and give it to you when you sell your mining stocks when the shit hits the fan? So that you can bid the price of gold up and compete with the bankers as they are now trying to buy precious gold and silver as the entire awoken human race repudiates their criminal fiat currencies and turns to gold and silver as real money?

The only purpose of trading mining stocks (and ETFs) is to divert liquidity away from real gold and silver.

TeethVillage88s's picture

So invest in Jr Gold Mines, since you know the just Crashed & Burned.

- Wall Street flees Jr Gold... time to be contrarian

Maestro Maestro's picture

Mining companies are owned and/or controlled by bankers and only constitute fraudulent vehicles to deliver their product, gold and silver, to market at cost or below cost, for the sole purpose of suppressing precious metals prices.

Mining companies' spurious profits depend on their hedges performing, thus on the price of their product, gold, going down, not up. (Said unlawful and illusory profits also are contingent upon the loans and fraudulent financial schemes bestowed upon the mining companies' balance sheets, by the bankers.)

If gold goes up, that means this toxic gravy train has been fatally derailed.

Ask yourself,

Why the bankers are going to print money out of thin air and give it to you when you sell your mining stocks when the shit hits the fan? So that you can bid the price of gold up and compete with the bankers as they are now trying to buy precious gold and silver as the entire awoken human race repudiates their criminal fiat currencies and turns to gold and silver as real money?

The only purpose of trading mining stocks (and ETFs) is to divert liquidity away from real gold and silver.

August's picture

The liquidity trying to flow into Junior Gold will be like trying to shoot Lake Erie through a fire hose.

Well, that's what Doug Casey used to say, before he retired from the prognostication business....

FWIW I do in fact own some junior gold mining stocks, to a small percentage of overall assets.

Maestro Maestro's picture

No, it won't. Read above and get out of the system NOW while you can.

rent slave's picture

Gold never moves up or down  before the Philies do so.It's been that way since 1975 when gold was re-legalized.

The Real Tony's picture

The next crash should usher in the longest bear market in history. At least a 20 year bear and somewhere in the 20 to 50 year time-frame. There was the 1966 to 1982 era but this time around it should be double or triple that.

zzzz88's picture

I believe it, even though most people do not take it serious,

the longer the bull market, the longer the following bear market, 

it is the law of nature, esp. what the stupid central banks did this time

Miss Informed's picture

All those squiggly lines just make me dizzy. Graphical gobbledygook.

Maestro Maestro's picture

***Don't buy mining stocks. All of them mining companies are working for the bankers, delivering precious metals to market at or below production cost just to suppress the gold price. By buying these stocks, you're only feeding the enemy. Let the bankers finance their own evil schemes. When gold stocks will go up, the dollar will have crashed anyway. By the time you sell your gold stocks and run to your coin shop to buy real gold with the proceeds, either the price of gold will have shot up to uneconomical heights or there won't be any gold coins left.***

Worse than the bankers rigging gold and silver prices and not having the gold that they sold you (or selling gold that they don't have via fraudulent COMEX Futures contracts) is the fact that we don't even have MONEY today.  Therefore all financial transactions and economic numbers predicated on the existence of money are FRAUD and FORGERIES presently.

Electronic digits and paper fiat currencies in use today are NOT money, according to the law of the country that issues the reserve currency of the world, the US Dollar (Article 1, Section 10 of the US Constitution); or by the tenets of the science of Economics (i.e., fiat currencies are not money because they are not a store of value nor a unit of account due to the fact that NOT ONE fiat currency's value is actually determined or stipulated in concrete legal terms).  Dollars and Euros and Yens are not even lawfully DEFINED as to what they all are exactly; what their economic worth and transactional value is. Hence, fiat currencies simply cannot constitute the legal foundation of any lawful contract!

(Also, there cannot be either inflation nor deflation in the ABSENCE of money.  Both inflation and deflation are monetary events which cannot take place where there literally is no money.)

What we have today is massive GLOBAL FRAUD mascarading as a monetary system based on the (fraudulent) US dollar because all fiat currencies are basically only a derivative of the US dollar, including the Euro, the Yen, the Yuan, the Rouble, the Shekel and the Riyal.

Furthermore,

Why do a few people get the right to print fake fiat money out of nothing and buy your goods and  services with it whereas you have to WORK to obtain the same worthless money created out of nothing?

THAT is the question at the heart of the matter.  That the bankers manipulate interest rates or the price of gold via fraudulent Futures trading (by selling gold that they don't have) with fiat money is a moot point.

To put it differently: why do the bankers get to have anything that they want without working for it and you, you don't?

All this talk about market rigging, monetary theory and fraudulent (paper) gold trading is a cover-up for INJUSTICE.

The US Constitution FORBIDS the use of debt as money; the US Constitution proscribes (debt) notes which is what the US dollar is presently.  Think, all other currencies are just another name for the US Dollar.

What passes for money today is a CRIME, no more no less.

 
People,

You are all aiding and abetting this crime every time you buy, sell, pay or get paid.

And then you ask, Why our leaders, the politicians, the bankers, and our military men and women are EVIL?

The answer is, because they are just like YOU. They are your sons and daughters.

FIAT CON's picture

Maestro your absolutely correct.

 It is tough in todays world of paper and ink to purchase things in life without Fiat, although if everyone trades in their extra fiat for gold this is a start.

 Treat the Fiat of your country as if it were a hot potatoe. This would create many coin shops that you could trade your worthless fiat for Ag & Au this would create an awakening of the masses, it would allow the sheeple to learn the difference between paper and ink and money the series called "the hidden secrets of money" (youtube)  is an eye opener to the masses, if they wish to learn anything. It is by design of the bankers that we have paper and ink. If we all shun the fiat and flock to real money the paper and ink will lose value like the Mark during the hyperinflation of Weimar Germany, which is what should happen.

 We need to reach critical mass of what Money is, and it is not, what is in your wallet.

 With the recent Hacking of the world, if a similar hacking hits the banking system, it could be far worse than china's ATM's not working ,it could cause the end of the value of fiat. So perhaps a new saying, "got gold" will be born.

Here is a little true story of how we can reach critical mass. The Hundredth Monkey so it is possible to teach what money is, one monkey ata time, until we reach critical mass. So doyourself and your family a favor teach your children what money is and what money is not!

The more people that learn the difference the sooner the end of fiat, but hey wait, isn't there a hockey/football/kardashian's etc on the tv or some MSM fake news on tv. The Romans refer to this as Bread and Circus! it still works today.

Please take the time to educate you rself and your family you only have your wealth to lose! Don't allow yourself to be fooled by the Fiat Con! 

 

Maestro Maestro's picture

Thanks for sharing, friend.

Xploregon's picture

"This would create many coin shops that you could trade your worthless fiat for Ag & Au this would create an awakening of the masses..."

I agree with your overall statement but, what makes you think coin shops (dealers) who's stock in trade is precious metals (the anti-fiat money) would sell or trade their PM's for declining, devalued or crashed "worthless" fiat currency?

Maestro Maestro's picture

You are correct. In time, they won't, as what's the point of giving away wealth (gold and silver) for less than nothing (credit/fiat).

Coin shops are an interim anachronistic and non ideal institution. Many of them are part pawn shop places who try to charge exorbitant markups of up to 10-15% over spot. They are also helpless easy prey for governments which can run them out of business at will.

Money, and deciding which project gets realized and which person gets the power to further his vision (essentially what banking should be about), are too important and crucial, to be trusted to the whims of ill-willed bankers, as they constitute the logistics of civilization itself.

Money deserves its own temple safe from the predations of psychopathic bankers who only see money as a source of power and domination.

Good money is an essential public service and not a financial weapon of mass depredation and oppression.

DjangoCat's picture

So, Maestro, how do you propose we buy our food and pay our rent?  Do we, the people, have any other choice but to prepare for the day when the bubble pops?

Maestro Maestro's picture

Know what you're doing and tell others about it as you're using credit/fiat to buy what you need and gold and silver. And put sticks in the Man's wheels whenever you can. They have a big tree but we have a small ax, each one of us.

Creepy_Azz_Crackaah's picture

Pay with sexual favors. Just call them dates, not payments.

Anarchyteez's picture

Crash it. Go ahead. Take'm to zero. I like free shit.

malizec's picture

Look at Venezuela at the moment. Country in total chaos, stock market in shambles yet not a single story about anyone stacking gold there. Strange.

mosfet's picture

Yeah, Venezuela stock market is in such 'shambles' it's soaring to new heights.

http://ibb.co/gVhTbQ

This is what inflation does to markets.  Why would anyone seriously believe stocks will stay cheap once CB's start massively printing and handing it out to banks to invest, while everything else skyrockets in price.  PM's are fine for the short-term but when the SHTF for 'years' you run out - Same for Bitcoin.  Basic necessity stocks that pay dividends don't run out.  Buy the coming big fucking dip in income producing stocks or burn through your hard & digital assets when it all goes to shit.  Your choice.

Miss Informed's picture

The Venezuelan government did so when times were better, and it has come in handy.

bardot63's picture

If you were stacking metal in Venezuela, why would you talk to the press?  Nobody there trusts anyone else there.   But I've seen stories that they are stacking silver, and that one ounce of gold buys a house there.  Don't have the links handy, but may have come from Simon Black.  But guarantee you metal owners are not giving interviews for the front pages. 

Silver Savior's picture

Dude! You are talking about stocks and a crash at the same time! The crash will take the dollar and all dollar demoninated paper with it. There will be no stock market! Just real gold, real silver, real platinum....... REAL!

Entourage's picture

I predict an amazing run in Bitcoin.

Ajax-1's picture

Yes, Shitcoin is just like gold particles which derived from exploding supernova's travelling through outerspace for millions of years and entering Earth's atmosphere by chance and becoming a rare portion of our terestrial landscape. Sarc.

PiratePiggy's picture

Did you send them $300 to get up and running?

Silver Savior's picture

Me too but I am betting more on Ethereum.