This chart sums up the enormous opportunity that lies ahead for gold mining stocks. Let’s go over some basics of bear markets. Typically a cyclical bear market lasts 2-5 years, and even in secular bear markets, the cyclical bears are interrupted by cyclical bull markets. We can see above with gold stocks in the 1980s, two major cyclical bears are shown here that lasted 5 years and 4.5 years. But they both eventually came to an end and were interrupted by new bull markets.
The current bear in the XAU gold miner index turns 4 next month. So it’s already an old bear and one of the worst bears in the history of gold stocks. Just like with the end of every bear market people are bearish and scared of gold down here instead of being bullish and excited like they should be.
What’s interesting to note is that the mid-2013 low in gold stocks was the most oversold gold stocks have been on the RSI in the entire history of the XAU. That low did prove to be a decent buy point as many gold stocks made large moves higher off of that low, but then they fell to new lows in 2014. But the RSI has formed a positive divergence even with these sharp panic lows that we’ve experienced lately in the gold stocks. These recent lows also could be completing a 5-wave down bear market and coincidentally a positive divergence in momentum is often seen on the 5th wave down.
One other thing to note is the turning points in these bull and bear markets often occurs at the end of the year or right at the beginning. So if gold stocks were to make the final low over the next two months it would go along with that pattern repeating once again.