How will we know when the gold bull market has run its course? The answer to that question lies in the understanding of the three stages of a bull market.

Stage 1
Bull markets begin in obscurity with only speculators and bargain hunters interested in the market. Often markets will double or triple in this first stage which will attract the attention of the professionals. This market will receive no press coverage and will be looked upon with ridicule by all.

Stage 2
Professional money managers will begin to notice the bull market and develop specialty products to take advantage of the trend. This is the longest stage, usually lasting for many years (5-10), and it is the most profitable. Prices may go up 10 to 20-fold during this stage. You will begin to see this market mentioned in the financial media on occasion, but the consensus is that this rise is just an aberration.

Stage 3
After years of exceptional returns in the bull market, the professionals finally admit that we are in a bull market and begin openly advocating the sector. The finanical media presents this market as the next "hot" thing, and talk about it incessantly. Individual investors finally take notice and pile in, not wanting to miss out on the easy money. This particular market is the talk of the office, Christmas parties and even the bartenders and barbers are giving buying tips. Of course, by this time, the easy money has already been made, and a bubble is immenent. After a massive selloff in a short period of time, the sheeple that bought in AFTER the hype lose the majority of their investment.


A Historical Example
The tech market bubble of 2000 was a textbook example of the three stages of a bull market. Here is a graph of Cisco stock from 1993 to 2003.

In January 1993, you could have bought Cisco stock for $1 per share when tech stocks were considered speculative. By 1996 you could have still bought it at $4 per share. By 1998 you could have picked it up at $8 per share. By then, everyone was wanting in as it was up eight-fold in 5 years. Of course, the stampede of greed took the stock to $82 per share in March 2000. EVERYBODY OWNED TECH STOCKS AND TECH MUTUAL FUNDS!

Then the bubble burst and by 2002 Cisco traded at $12 per share. The late-comers had lost most of their investment.


Gold - Stage 2 Begins
Over the last 10 years gold has risen in price from $250 to $1000 per ounce. During this time it has been shunned by everyone. Financial news channels laugh at the idea of owning gold, and the public doesn't even have a clue that gold has been the best performing asset over the last 10 years.

However, within the last few years, Wall Street has begun to create products to take advantage of this bull market. Gold and silver ETFs (sort of like a gold mutual fund) are starting to be pushed as investments by Wall Street. Yet, the masses still have not considered gold. (Ask ANY ten people you know if they have gold in their investment portfolios. They will give you a strange look and ask you what you are talking about.)

This is the typical start of Stage 2, which I repeat, provides the largest gains in a bull market.

The fact that gold is up over 4 times its value in the last 10 years is nothing compared to what is on the horizon. Were gold and Yahoo placed side by side, in terms of the price of Yahoo, gold would be selling at about $4/share now. So assuming it peaks where Yahoo did at $82/share, that would put gold at $20,000/ounce.

Maybe gold won't have the blow-off that the tech stocks had. Maybe it will be greater. My bet is on the latter.

In the 1990's there were plenty of alternatives for investors to choose from. Today, there is nothing. Gold is the only positive performing asset over the last 10 years. The stock market has been flat for the last ten years, and bonds and bank accounts are showing negative returns adjusted for taxes and inflation.


When will we be at the top?
When everyone it talking about investing in gold, when all you see on TV is advertisements for gold investments, and when the financial news media is shouting the praises of gold, THAT will be the time to get out.

When your hairdresser is giving you gold tips, run screaming.

We are a long ways away from that day, so accummulate all you can, while you can. And when that day comes..... I'll see YOU in the Bahamas.