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Repeat after me, and say it out loud: Gold!
It sounds good, doesn’t it? You don’t even have to be a gold bug to appreciate its iconic appeal. It just comes naturally. Money – real, honest, unprintable (and damn near impossible to find) money – will do that to you.
The bull market in gold that began in 2000 has been characterized by long waves up – and long waves down. In rough numbers, Wave 1 took gold from $250 to $1,900 over a 12-year period. That particular stretch was marked by fears of both inflation and deflation, periods of dollar strength and weakness, political stability and instability, and, of course, strong and weak commodities. Yet regardless of any of these factors, gold ended every single year higher than it had begun said year. For 12 years. That’s an impressive bull market. What followed in Wave 2 also constituted a long wave, as gold corrected from its peak to nearly $1,000 and has been consolidating since. This too is impressive.
The nature of the move itself is not dramatic. After all, if a random equity were to move from $2.50 to $19 and then retrace its steps back to $10 or $11, would anyone be surprised? Not really. What is truly astonishing is the length of the moves in terms of years and scale. If I am right about my bullish stance, then gold’s next, third wave higher will not only take out the old highs, but could actually be of longer duration – and far more breathtaking in its gains – compared to the first up leg. To me this appears inevitable, just as other setups have appeared to me inevitable in the past – including in silver, platinum group metals (PGMs), and hydrocarbons. In this recurring feeling, I am reminded of W.H. Auden’s observation that “the most exciting rhythms seem unexpected and complex, the most beautiful melodies simple and inevitable.”
There’s a lot to unpack here. Indeed I am very much used to being told that my forecasts are somewhat around the bend when I render them – such as in 1994, when I predicted that silver (then trading with a $4-handle) would return to $50, or in 2003 that oil would rise from around $20 to $100. In both instances, I created companies to give myself leverage to the underlying theses, and proceeded to wait for the market to migrate from finding my forecasts enormously unlikely to acknowledging their miraculous – if not, by then, fully preordained – realization. In the case of NOVAGOLD, I didn’t build it, but was lucky enough to seize a particular moment in time when my team could rescue this marvelous story. So one clearly gets the idea of how, in this context, I see gold: I reckon that the next up leg of the bull market in gold will ultimately shrug off conflicting headwinds more or less in the same way as the first one did for a dozen years. Furthermore, over the ensuing decades, the gold chart could well look suspiciously similar to the one the Dow Jones Industrial Average has experienced since its breakout past the 1,000 mark in the early 1980s.
Even if this uber-bull case is too aggressive, this past year likely marked a critical turning point in the long- term secular bull market in gold. It is not so much that long-term bulls should take satisfaction that the monetary metals may have put in a bottom to the post-2012 correction, or that gold is setting highs we haven’t seen in six
THE WIND OF CHANGE
Dr. Thomas Kaplan
—
Chairman, Board of Directors
NG 7