Gold Price Forecast: Is Gold Ready for Another “Black Monday”?

Friday, October 20, 2017

gold and money

Yesterday, October 19th, was the thirtieth anniversary of “Black Monday,” the massive stock market crash in 1987 that saw the Dow Jones lose over 20% of its value. To put that in today’s terms, DJIA would have to lose over 4,800 points to have another day as bad as Black Monday. Considering that some of the most relevant stories in recent stock market history only point to movements in the range of three digits, and how long we’ve currently enjoyed the current bull market, it’s only natural to ask if another Black Monday is around the corner. And if so—what might this mean for one of the most important hedges in all of investing: gold?

Time to Be Worried About the Stock Market?

Yesterday in this space, we reviewed the performance of silver over the recent bull run—which is actually flirting with the idea of lasting a decade—and found that precious metals as a hedge don’t necessarily move immediately upward in the face of something as stark as a Black Monday scenario. And while there are no guarantees that a market correction or crash is around the corner, it’s only natural to wonder if we’ve enjoyed inflated stock prices for too long.

According to a recent opinion piece by Howard Gold at MarketWatch, who noted the Black Monday anniversary, there’s a possibility that the next crash could be even more devastating than this seminal moment in the history of the stock market. Simply because we haven’t seen this crash yet doesn’t mean it won’t happen—after all, the crash of ’29 came after an entire decade that became known as the “roaring Twenties.”

Gold’s Role in the Next Crash

Let’s face it: it’s not a matter of whether it will happen. It’s a matter of when. A stock market crash is inevitable, and those who believe that the market is due only for stagnant growth for the next five years are ignoring the fact that “crash triggers” can come from anywhere.

Knowing this, investors are forced to seek a hedge that might offer them returns even if they don’t properly time the market. That’s where precious metals come in. Though silver has been relatively stable over this long run in the stock market—which is odd, considering its reputation for short-term volatility—there’s an argument to be made that precious metals are an essential way of preparing for the next Black Monday.

No Crystal Ball

The price of gold was down a few dollars yesterday as the stock market mostly hovered in place. But these days are not the only days that happen on Wall Street. There may be another day when the stock market sees record volume trading thanks to a massive crash, and wise investors will be ready for it. Gold will be one of the most interesting trades to watch as we close out 2017, with 2018 and 2019 looking to either break the trend of stock market corrections—or to watch history repeat itself. On this recent anniversary, it’s only fair to look to the future by examining the past.

Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.