By Peter Cooper (thenational.ae)

A weakening U.S. economic recovery, falling profit and revenue, the effect of the high U.S. dollar on multinational earnings, valuations not seen since the days of the dot-com bubble—they all point to a lower stock market. What does this mean for gold?

Most gold analysts go back to the global financial crisis to see what happened the last time Wall Street tumbled.

In the initial stages of the 2008 crash, gold sold off, but this time around, gold has already been through a 4-year correction, and is not coming off a 7-year bull market top. However, given that a falling stock market tends to drag everything else with it, gold could drop to a new low.

Elliott Wave theorists say $960, as a 50% retracement from the $1,920 all-time high of October 2011, is possible. Other chartists think gold won’t go below $1,000, because of production costs and central bank buying at depressed prices – so gold could hit a new low this year, but the question is whether it could hit a new high.

Again, past precedent is handy here. Gold and silver showed the strongest recovery of any asset class in the global financial crisis, and surged three-fold and eight-fold, respectively, from their highs of 2011.

Gold topping $1,900 again may seem unlikely but when you think of the reaction of the global central banks to a Wall Street crash in terms of money printing, a flight to gold is not hard to imagine. Quantitative easing drove gold to the highs of 2011 from the big sell-off of 2008-2009 in a classic flight to safety.

Consider too that the resumption of the gold bull market now from its 4-year correction would bring the metal to the classic final phase of a long commodity bull run, and that is the parabolic stage. This last happened in the late 1970s and the price spike of 1980. Gold rose eight-fold from its correction in the mid-1970s…