Below is a chart comparison of the Barrons Gold Mining Index (BGMI) and the US$ gold price covering the period from 1974 through to 1984. In other words, this chart captures the final 6 years of the secular bull market that ended in 1980 and the first few years of the secular bear market that would ultimately continue until 1999-2001. Note that the BGMI portion of the chart has a linear scale whereas the gold portion of the chart has a log scale.
The chart shows that:
1. Major corrections in gold stocks and gold bullion ended during the second half of 1976. As an aside, these corrections unfolded in parallel with an economic rebound.
2. The BGMI traded sideways for about two years beginning in early 1977, despite the fact that gold bullion was in a strong upward trend throughout this period. As a result, in late 1978 the BGMI was still about 50% below its 1974 peak even though gold bullion had returned to its 1974 peak.
3. Although the BGMI finally began to trend upward in 1979, its weakness relative to gold bullion became even more pronounced due to gold's dramatic upward acceleration.
4. When gold bullion peaked at $800-$850 in January of 1980, the BGMI was no higher than it was in 1974. This means that the BGMI did no better than 'tread water' over a multi-year period during which the gold price quadrupled.
5. The BGMI and gold bullion pulled back sharply from their January-1980 peaks into April of that year, at which time the gold sector of the stock market commenced a spectacular 6-month advance that would take the BGMI to almost double its January-1980 peak even though the gold price remained well below the high made early in the year. That is, there was massive strength in the mining stocks relative to the bullion during the months AFTER the bullion had reached its ultimate peak.
6. The BGMI and gold bullion commenced long-term bear markets in October of 1980.