Reasons Why Gold May Be Poised for its Next Big Bull Run in 2023

The chart above displays the average monthly price of gold dating back to January 1995. As of the close of business on the last day of 2022, the average price for the month of December was $ 1,798.14. The 40-month average was $1,759.87 and the 20-month average was $1,802.60. Obviously, gold was in a huge bear market, from September 2011 when the average price of gold for that month was $1,778.38, to its bottom average price of $1,068.14 in December 2015. That was a decline of 39.78%. And then there was the other major decline shown on the chart above, that being from a monthly average high of $964.42 for March of 2008 to a low monthly average of $758.04 in November of 2008 during the financial crisis. That was a 21.4% decline from top to bottom for that cycle. Does that mean that the current tepid decline of 8.8% from the all-time monthly high of $1,969.22 in August of 2022 to $758.04 has a lot farther to fall before we will have the all-clear bull market signal for gold and silver that subscribers to this letter are looking for? I don’t think so. Various charts on the following page suggest we are at or near the bottom now.

The charts in black here are from Tavi Costa of Crescat Capital. As Tavi has recently pointed out, every time 70% of the U.S. Treasury yield curve has inverted, it has signaled a bull market in gold straight ahead. As the chart directly above left reveals, 76% of the U.S. dollar Treasury yield curve is inverted.

The blue line in the chart above on your right shows the performance of gold relative to the S&P 500 from gold’s bottom in 1973. Gold outperformed stocks by 147% over the next 24 months. The yellow line in the chart above right tracks the average performance of gold to the S&P during all 24-month periods after the yield curve has inverted by 70%. On average, gold outperformed the S&P 500 by 72% during those occurrences. 

Another big market picture is the enormous rise in what I call “hot air stocks” like crypto currencies. As they say when the tide goes out, you can see who is swimming naked. And so, as the Fed engages in a more responsible monetary direction, those companies that were strong when money was free are now being exposed for their “nakedness.” Thus, we are starting to see the tech stocks rolling over, relative to the S&P as well as to commodities. 

The chart slightly below on your right measures the relationship of gold and silver (NYSE-CEF) to financial assets (stocks and bonds). Starting in 2012, financial assets rose dramatically visa-a-vis CEF. Since then, CEF has held its own and now has actually broken through the downtrend that started in 2012. As noted above, gold bottomed in December 2015 at $1,068. And now, gold seems to be nearing an end of an 8.8% correction from its all-time high of $1,969.22 in August 2020 as COVID was stimulating massive money printing.

Perhaps the most im­portant chart shown here as far as the junior exploration stocks are concerned is the one on your left showing that cash positions of major gold miners are the highest in history. That should bode well for companies like Snowline Gold, New Found Gold, Eloro Resources, and others covered in this letter that are well on their way to making world-class gold and silver discoveries.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.