Gold and the next Great War

Originally published at Stockhouse.com.

Gold is an excellent barometer of, among other things, military aggression. The gold price will typically spike significantly higher for at least two months prior to the outbreak of war.

Let's turn our attention to a cycle which we've rarely discussed over the years. The Kress 24-year cycle is one of the components of the 120-year cycle series which is scheduled to bottom in 2014. The 24-year cycle tends to get eclipsed by the longer-term cycles like the 40-year and 60-year cycles (both of which have a major impact on equity prices and the economy). But the 24-year cycle takes on a special significance all on its own: it's the cycle of war.

The final “hard down” phase of any cycle is defined as the final 8% to 12% of the cycle (averaging 10%). Therefore the final “hard down” phase of the previous 24-year cycle encompassed most of the year 1990. Not surprisingly, the year was a bearish one for stocks. The banking sector was particularly hard hit by this particular 24-year cycle as 1990 was the worst part of the infamous S&L crisis and saw the failure of more than 100 small banks.

The 24-year cycle might be described as the first of the major longer-term cycles and tends to bottom with a strong impact. Not only does this cycle typically bring about a major decline in equity prices, its bottom also historically coincides with the initiation of military hostilities.

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