The gold market, and in particular, gold equities, is very cyclical and is about to come out of a bear market into a bull rally, this according to Rick Rule, president of Sprott U.S.
“I think it’s important for people to understand that in a cyclical industry like gold, the bear market that we have been through was unusually deep and unusually severe. I think it’s important to note that we are either approaching the bottom, at the bottom, or my suspicion is just off the bottom, and that the recovery that we are likely to enjoy, at least if history repeats, could be very, very dramatic,” Rule told Kitco News.
Rule noted that past recoveries have historically seen gold equities rally in the triple digit percentages.
“There have been [in the last 50 years] eight recoveries from oversold bottoms, and speculators should note that those recoveries have varied in scope between 180% in equities index gains and 1,200% index gains. The point of this is that when bull markets take hold, they really, really move,” he said.
Gold prices will have to move higher, however, before the mining companies follow suite, he said.
On base metals, the current economic recession will have to recover first before any meaningful move upwards in prices is to be realized.
“With regards to the broader commodities group, the industrial materials, I think we have a recession to suffer through before they move. I wouldn’t doubt that we will see the bottom in pricing in industrial, non-precious metals, this year, but my suspicion is that you will have to see further supply destruction,” he said.
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