“This chart (below) shows the DJIA on the LHS & the gold price on the RHS with Homestake Mining & Dome Mines overlaid to give a perspective on what was happening back in the 1930's. The DJIA didn't bottom till mid 1932 & Homestake Mining had started to climb in 1931 with Dome Mines following in 1932.

But both mining stocks didn't start to take off till after the DJIA had finished collapsing. The greatest rise in these gold stocks was from 1933 thru to mid 1934 with another little flurry in end 1935/early 1936. What I see as most important here is that the gold stocks did not start to move until after the DJIA had totally corrected.

If we are to see the same in gold stocks today do we have to wait first for Europe & the US Markets to come back to fair value? (See chart below.)

Here's Homestake Mining showing the meteoric rise from $70ish to above $400. The major part of the rise was from late 1932 to late 1933 whereby Homestake Mining rose from $125 to $360 - a 290% gain. The drop in 1937 is a share split.

Here's Dome Mines showing the main rise in 1933 when it jumped from $10 to $30 - for a 200% gain. The drop in 1938 is a share split.

This chart shows the Dow/Gold Ratio (which bottomed in 1932 when the DJIA stopped falling - prior to gold stocks rising) overlaid with Tobin's Q a Ratio designed to show the overvaluation/undervaluation of the share market companies.

As can be seen the two cycles are in synch and for today's Dow /Gold Ratio to bottom one would expect Tobin's Q to drop to -0.7 or lower. Hence one can deduce that the DJIA has further to fall until we see it's cyclical lows.

The next chart shows gold stocks performance vs physical gold during the last decade (see chart below). The Global Gold Indices comprises the major producers from the world covered by the US indices HUI & XAU plus Australian, Canadian & South African producers.

As can been seen there has been huge capital destruction whilst gold has risen 6 fold. Since 2006 only one year has been positive for gold stocks vs gold & that was the whole stock market bouncing back from the 2008 sell-off.

As can be clearly seen K-Wave Winters destroy fiat asset values & when we look back in history to the 1930's we see that the gold stocks only start to outperform after the fiat equities have stopped falling. Thus those who seek to profit from investing in gold stocks need to wait till the general share markets have corrected before loading up.

N.Laird for Kingsworldnews