Gold Is the Only Long Term Bull Market

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". . .gold is not only in a long-term bull market, it is the ONLY long-term bull market."

One of our themes over the years has been that monetary factors are driving the major trends in the financial markets. To put it another way, we have tended to downplay the effects on market prices of non-monetary drivers, such as the expansion of the Internet, industrialization of China, and "Peak Oil."

The dominance of monetary factors has an implication that we have intimated in the past, but have not blatantly stated: gold is not only in a long-term bull market, it is the ONLY long-term bull market.

By way of further explanation, for something to be in a long-term bull market it must be in a long-term upward trend in REAL terms; that is, its purchasing power must be increasing. On the other hand, if an investment's long-term upward trend in nominal price terms does not translate into a long-term upward trend in real terms, then the price rise is due to depreciation of the currency rather than appreciation of the investment.

Now, determining whether a nominal gain translates into a real gain is often not a straightforward matter due to the impossibility of measuring the economy-wide change in a currency's purchasing power. In fact, there is no ideal way of measuring the real performance of any investment; at least, none that we know of. We have found, however, that an investment's long-term performance in gold terms is a reasonable proxy for its real long-term performance. We therefore consider that for something to be in a long-term bull market it must be in a long-term upward trend relative to gold.

This prompts the question: which of the major markets are presently in long-term upward trends relative to gold? The answer is: none of them. Over the past decade there were multi-year periods during which various markets trended higher in gold terms, but the relative gains achieved by these markets rapidly evaporated last year.

To put it another way, a good case can be made that gold is the only long-term bull market 'on the go' at this time. Moreover, based on the information presently at hand, we suspect that this will remain the case over the coming decade or until there's an upside blow-off in the gold price.

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