Gold Price Drops Three Straight Months For First Time Since 2001Posted on Thursday, May 3, 2012 - 19:28 pm
Between March 2001 and April 2012, the price of gold never fell for 3 months in succession. “Two months max”made for a great slogan and signal to buy on pullbacks, most recently in January 2010, your last chance to do so below $1,100, and April 2009, which was your last chance to buy below $900. Divide by ten and we’re talking about the price of the GLD.
Until April 2012 that third down month just never came.
Three consecutive months of falling gold prices are so rare that you can count the occurrences. Since 1957 in fact, they’ve struck only 65 times in a total of 661 three-month periods.
These three-month drops – let’s call them recessions to save me having to re-title these charts again – are rarer still in the U.S. stock market.
The S&P 500 index has delivered only 55 runs of 3-month drops over the same 55-year period.
As both charts show, three-month recessions are rarest of all in a runaway bull market. The S&P 500 put in none between 1991 and 1999, just as prices to buy gold put in none between 2001 and spring 2012.
So, is this three-month tumble the last straw for gold, finally snapping the camel’s back after the big hump of $1920 per ounce last summer? After all, the big top of January 1980, after which gold prices spent two decades in decline, took almost a year to deliver a three-month run of falling prices. Three losing months came thick and fast after that.
Three-month declines don’t necessarily signal a bear trend. The S&P 500 suffered such falls in each of July, August and September last year – making for five monthly falls on the trot, in fact, over spring/summer 2011.
The U.S. stock index still went on to recover and top that starting level, however, just as it went on to recover and blast through its previous highs after hitting a run of three-month recessions in 1990, not even midway through its long 18-year bull run.
Check also the sharp pullback in dollar gold-prices during 1975-76 on our chart above. Gold fell in seventeen of those 24 months, halving from top to bottom and recording 10 three-month recessions, more than during any other two-year period, including the early 1980s or the big brown bottom of the late 1990s.
Who was to know, amid that mid-1970s bloodbath that gold was on its way to rising sixfold again?