Despite all the headlines we hear about a commodity boom, gold and silver prices have gone nowhere over the last twelve months. Meanwhile, the market for oil, copper, aluminum and other natural resources couldn't be any tighter leaving precious metals investors very frustrated to be left out of the action. On CNBC, energy stocks have replaced tech stocks in the "must own" category. Except for the occasional mention of Newmont (because of its size) or Goldcorp (because of M&A activity), no one ever talks about the mining stocks.

So what's going on? With the Fed stepping up its tightening, is the three year gold bull market over? Are we about to enter an economic slowdown where every single asset class suffers a liquidity induced correction?

The answer to these questions lies in history. We think today's environment is almost a duplicate of the 1970s. And if you take a look at the chart below, you will see that the gold price took a little break after the first three years of its bull market.

While every bull market is unique, the gold bull beginning in 2001 showed some classic characteristics of other bull markets. At the beginning, no one took gold seriously and some in fact mocked it as a barbaric relic. After 9/11, gold attracted a few investors as a terrorism hedge but remained off of the radar screen almost entirely. It was only in 2002-03 when gold finally started to gain recognition as a hedge to dollar depreciation. By early 2004, gold had earned its right to be taken seriously and was no longer mocked by the bubbleheads on CNBC. It was about one year ago when we were visiting some colleagues on Wall St. when we heard people talking about gold stocks at a dinner party. This got us worried and coincidentally happened to mark a short-term top of the gold/silver bull market.

Since the 2004 top, most of the hot money has managed to avoid gold and has been directed instead towards energy. As oil approaches $60/bbl, the public has once again started to ignore gold and silver. Yes, you may see the occasional banner-ad or radio commercial about buying gold coins, but it seems that a wall-of-worry still exists when it comes to the mining stocks. This is normal in a long-term bull market. The public still doesn't know much about gold. We would venture to guess that 99% of the American public cannot tell you what a Krugerrand is. Bottom line: don't pay attention to short term fluctuations in the gold price and be sure to use this time to add to your positions. We are confident that over the next couple of years, gold and silver will be significantly higher than they are today.