Past Gold Bottoms: 1976 - 1982 - 1985 - 1993
Gold bottomed on August 30, 1976 at $US 102, having fallen from a high of $US 195 set on the last trading day of 1974. The main impetus for this Gold price fall came from the U.S. government's decision, implemented on the first trading day of 1975, to legalize Gold ownership for American citizens.
Gold was bid up to its $US 195 level by foreign traders who wanted the Gold to sell to the American public. As soon as it once again became legal for Americans to own Gold, the price was blitzed by a combination of foreign selling and U.S. Treasury selling. The Treasury even bought Gold from overseas to depress the price.
The result was that as soon as the American people started to buy the Gold that had been forbidden them for over forty years, the price started to fall. Gold did not regain its 1974 high of $US 195 until very late 1978. For four years, Gold was effectively discredited in the eyes of the American public.
Gold bottomed on June 21, 1982 at $US 296. This was the climax of the collapse from the $US 850 level which had been reached exactly 29 months earlier - On Jan. 21, 1980.
Gold took off when the Fed lowered U.S. rates in response to a threatened debt default by Mexico. But this time, and after having been flat since late 1976, so did the Dow. In fact, the big upmove which constitutes this Gold "buy signal came in the same week as the start of the "Reagan Bull".
When you view the more detailed chart (click on this one), note that the "buy signal" is a conservative one. Note also the precipitous $US 100 fall at the end of February 1983. Gold actually fell from $US 505 to $US 400 in five trading days. It has not recovered from that fall to this day.
Gold bottomed on February 25, 1985 at $US 282. This low came at the end of a four year period during which the trade weighted value of the US Dollar had risen more than 30%.
The big jump in the Gold price on March 19, 1985 (it rose $US 36 or 11.88% in one day) came in conjunction with two other events. First, a very small "run" on some Savings and Loans in Maryland and Illinois. Second, the announcement that the U.S. was a foreign debtor nation for the first time since 1918.
When you view the more detailed chart (click on this one), note the Gold was flat for more than a year. The Gold price, which had closed at $US 339 on March 19, 1985 - did not close above $US 350 until June 10, 1986. When it exceeded $US 350 again a month later, the Gold stocks started to roll.
The other item to take note of is that although Gold itself continued to climb after the crash of October 1987, gold stocks crashed along with the markets. Gold itself sold off in early 1988 as a concerted global effort was made to prop up the U.S. Dollar.
This five month Gold "boom", during which Gold rose from $US 325 to just over $US 400, has been attributed to everything from planetary alignment to the "cornering of the market" by certain famous speculators.
In fact, the 1993 Gold price rise took place at the end of a five-month period during which Gold did not vary much more than $US 10 per ounce. In March 1993, just before the Gold price began to rise, Mr Greenspan had appealed to the Congress to legislate changes to limit spending growth.
In April, the U.S. debt ceiling was "temporarily" raised to $US 4.37 TRILLION. Three months later, with Gold up about $US 80 from its level of March 1993, the Congress passed the 1994 U.S. budget on the deciding vote of Vice President Gore. They also raised the debt ceiling by $US 530 Billion to $US 4.9 TRILLION.
A savage Gold sell-off came in concert with this debt ceiling rise. Gold then regained most of its losses by the end of the year to begin a three-year period trading in a range between $US 375 - 395.
