By Howard Gold
Precious metals have been one of the best places to be in the market in 2016.
As of July 8, gold had surged 31% from its December 2015 lows, while silver had skyrocketed by 50%. During that same period, the S&P 500 Index SPX, +0.70% of the largest U.S. stocks was up about 5%.
But precious-metals boosters shouldn’t get too complacent. Gold GCQ6, +0.43% and silver SIU6, +1.53% — and all commodities — are in long-term, secular bear markets that could last at least another decade. And the gains we’ve seen are likely to be as good as it gets for a long time.
Those are the views of John LaForge, head of real asset strategy at Wells Fargo Investment Institute, the research arm of Wells Fargo’s Wealth and Investment Management division. He believes we are in the early innings of a long, bearish supercycle for gold, silver and other commodities.
“I think this is pretty much it,” LaForge said about gold’s recent run to about $1,370 an ounce. “I think we’re at the point where you’re looking at $1,400-$1,440 on the up side” for the current move, which he calls a short-term rally in a very long-term bear market.
LaForge, who previously worked at deep-dive analytics firm Ned Davis Research, has studied commodities markets going back to 1800. His conclusion: They tend to move in big, multiyear bullish and bearish supercycles. There have been six of each over the past 216 years.
Commodities bull markets have averaged 16 years in duration, and bears have lasted an average of 20 years.
Why the difference? Because it takes a little longer to work off the excesses that commodities bull markets create. During those supercycles, commodities like gold, silver, oil, copper and food “often moved together, like a family,” he wrote in a June report.