On December 31, the last (shortened) trading day of the year, the spot future price of Gold gained $US 15.50 to close at $US 1421.40. This was the high for the year, it was also a brand new all time high for Gold in $US terms. And last but not least, it was the highest point yet reached in a bull market which has now continued unbroken for a full decade.
Here is the record - the year-end spot future closes for Gold in $US terms right back to the end of 2000
We have seen many assertions in the mainstream US financial press that this decade-long bull run for Gold is the best since "at least the 1920s. This is a fatuous statement. The 1920s was the last full decade in which Gold actually circulated as money in coin form inside the US. It was the last decade in which the US Dollar was "fixed" to Gold (at $US 20.67 per troy ounce) for Americans. It was the last full decade in which any American could go into any bank with paper US Dollars and redeem them in Gold. In the 1930's, Gold ownership became illegal for Americans. And by the time that law was rescinded in 1975, there was no official connection whatsoever between the US Dollar - or any other global currency - and Gold.
The only relevant comparison to Gold's present bull market is the one which took place in the aftermath of President Nixon's closing of the "Gold window" in August 1971. The 1970s Gold bull market lasted less than eight and a half years - from August 1971 to January 1980 - with a 53 percent correction in the middle in 1975-76. The current bull market has emerged a full decade. The biggest correction over that period was the one that saw Gold fall from $US 1004 in March 2008 to $US 705 in November 2008. In the bit more than two years since that November 2008 low, the $US Gold price has more than doubled.
It took about two years for the Gold price to double after the $US 102 low it set in August 1976. The Gold price then quadrupled over the following year and a half. We've seen nothing approaching that spurt so far in the current bull market. In real (as opposed to government calculated) terms, Gold would have to more than double from current levels to equal its January 1980 ($US 850) purchasing power.
In 2010, the $US Gold price rose by 29.67 percent. That is the second best annual percentage increase of the bull market to date, beaten only by the 31.35 percent gain of 2007. Silver has done better still, indeed much better. Over 2010, the $US Silver price rose 83.67 percent, its best annual percentage gain since 1979. And even now, with a 2010 close at a new spot future high for the year of $US 30.93, Silver still lags far behind the $US 50.00 highs it reached almost 31 years ago in early 1980.
In our first Gold Commentary for 2001, The Privateer coined a word to describe the state of the Gold market in general and the state of the $US Gold market in particular. The word was "elbbub". Here's how we defined it:
"The term 'bubble' is a useful one in financial analysis, referring as it does to any market which has seen prices blown up to disproportionate levels. But, in this context, what is the opposite of a 'bubble'? We don't know of a convenient word to use, but if one wants to describe the present $US Gold "price", that is what we are seeing. How about an "elbbub"? Kinda catchy - don't you think? ..A 'bubble' has nowhere to go but DOWN. An 'elbbub' has nowhere to go but UP
A year later, in our first Gold Commentary for 2002, The Privateer had this about the prospects for Gold:
"As history shows, the capacity for human beings to hide their heads in the sand is very large, but it is FINITE. 2002 will define the limits of this capacity. The sub $US 300 Gold price, which has been the only constant of the global financial system over the last four years plus, will NOT survive this year."
A glance at the list of year-end $US Gold prices above will show you that it didn't. And it has been going up ever since.
We have ALWAYS advocated a private holding of physical Gold (with Silver a close second for different reasons). These are not "investments", they are the only absolutely foolproof means of financially insuring oneself against ANY eventuality whatsoever. In a world in which honest money does not exist, the need to own some is acute.
(Chart appears here in original analysis)
A low was hit on the chart when spot future Gold closed in New York at $US 705 on November 13 2008. This pushed the chart two "Xs" below the $US 715 support level established in late October and equalled early in November. Then came the first big turnaround - and upturn on the chart - of November 14. The region between $US 700-720 firmed as SOLID support for Gold. That support "zone" was emphatically confirmed as Gold rose by just over $US 110 between November 13 and November 28, 2008.
By February 20, 2009, Gold had made it all the way back to the $US 1000 level. But it did NOT break through the $US 1000 barrier. Instead, what was traced out on this chart was the right shoulder of a gigantic "reverse" head and shoulders formation. Then Gold made it back to $US 1000 and on September 16, 2009, closed at $US 1020.20. That broke decisively above the $US 1000 "double top" on this chart and revalidated the entire bull market - from the bottom. In just over two months, from the end of September to early December 2009, Gold soared from $US 1000 to $US 1218.
Then came the onset of the "sovereign debt crisis" and an initial correction for Gold. But as the crisis worsened and the Euro started to sag, Gold roared back. Gold hit a new all time high in terms of Euros as far back as February 11, 2010. On May 12, it set a new all time high in terms of the US Dollar. At the beginning of June, Gold closed above 1000 Euros for the first time. And on June 18, spot future Comex Gold closed above the $US 1250 level for the first time ever, substantially exceeding the highs it set in May and early June.
At the beginning of July, Gold turned down with a vengeance. The $US 25 spot future Gold price fall on July 27 produced a genuine correction on the chart. The upturn came on the first trading day of August. On September 7, the $US spot future gold closed above its June 2010 high. On November 9, after a very short-lived "correction", Gold reached a new all time high just above $US 1410. By the end of the year, it was $US 1421.
In February 2009, spot future Gold closed above the $US 1000 level for the second time. While the close did not quite equal that of March 2008 in $US terms, it set new all time highs in terms of many other currencies, the Yen being an ongoing exception. Gold closed above 200,000 Yen in January 1980 and has not since approached that level.
On September 11, 2009, spot future Gold closed above the $US 1000 level for the third time. Since the end of October 2009, Gold has not been below $US 1000. The metal closed at a new $US all time high (of $US 1258.30) on June 18, 2010. After a July correction, Gold exceeded that June high by September 14. By October 14, the $US Gold price had reached $US 1377. A week after Mr Bernanke and the Fed embarked on their latest mission to monetise the US Dollar into oblivion, Gold exceeded $US 1400 - before the sharp sell-off just in time for the G-20 heads of state Summit. Gold hit a new all time high of $US 1416 on December 6 and another one of $US 1421 on New Years Eve.
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The big Gold surge from June to the end of October this year was pretty well exclusively against the US Dollar. In US Dollar terms, that surge accelerated in lock step with the Fed's announcement of "QE2" on November 3. Gold also rose in terms of both the Euro and the Yen, but it FELL over the week in terms of the Australian Dollar which reached and then surpassed parity with its US counterpart for the first time since before the Aussie Dollar was floated way back in December 1983.
By December, Gold was almost back to its early November highs in US Dollar terms and had surpassed them in terms of both the Euro and the Yen. Gold hit a new all time high of $US 1416.10 on Monday, December 6 Then came the bond yield surge which slowed Gold down momentarily. And then came the year-end all time high for Gold in US Dollar terms.
As has been the case throughout 2010, the only major currency in which Gold remains below its February 2009 level is the Aussie Dollar. At current (December 31, 2010) exchange rates, it would take a Gold price of $US 1598.60 for the Aussie Gold price to equal the all time high it set on February 20, 2009.