For most gold investors, the quintessential bull market was the move that took bullion to $850 in 1980.

To help keep that happy ride in perspective, gold had bottomed at $104 in August of 1976. From there it rose 725%, to $850 in January of 1980, with most of the gain coming in 1979. In today’s dollars, gold would need to reach about $2,000 to match that 1980 high.

The next page in our story is trading activity on the Vancouver Stock Exchange (VSE), the world’s leading exchange for junior resource stocks. The chart below shows the value of resource stock transactions from December 1978 through December of 1980. You’ll note that, despite 1979’s strong run-up in bullion prices, trading activity was nearly constant and at modest levels for most of the year, indicating remarkably little investor interest in gold stocks.

Somewhat predictably, the big trading activity didn’t come until January of 1980. Following gold’s subsequent steep fall to $482 in March, trading picked up again as gold rallied to a secondary peak of $711 in September.

Trading Activity versus Gold, 1979/1980

While it’s tempting to view the trading history as another case of investors piling into an investment at the worst possible time—in this case, after gold had peaked at $850—when you look at share prices, you’ll see that’s not quite the case.

Share Prices

Below is a sampling of the more prominent gold stocks of the day—juniors and producers—and how they fared over the 1979-1980 period. Between December 1978 and the gold’s price peak in January 1980, gold stocks turned in stellar performances.

It’s noteworthy that the peak for the stocks came well after bullion had peaked.

Even though the price of gold fell sharply—from $850 to $482, between January and March—it subsequently recovered and ran back up to $711 in September, giving gold stock investors a false hope that gold would retake its previous high and go to the stars. Unfortunately, the opposite happened, and the long dark night of falling bullion prices set in. Many stocks simply dried up and blew away.

Also notable is that junior explorers often do much better than producers in a bull market, even one driven by strongly rising bullion prices. To figure out why that is, think back to the dot-com boom, when the startups and miscellaneous cats and dogs far outperformed established companies.

Case in point: recall that, pre-merger, Time Warner, a going concern with tangible assets and an identifiable revenue stream, was able to command a market capitalization of “only” $83 billion… while loss-making AOL, rich mainly in blue sky, was valued at $163 billion. In the case of the former, the likely returns were predictable and clearly finite. In the case of the latter, investors paid up and paid big for the dream of untold riches… much the same as they do for junior explorers when hearts are beating fast for gold.

So far, gold shares have been relatively quiet compared to gold itself. That will change, and dramatically so, once the investment masses wake up to gold and the role it has to play in the new economic realities.

As indicated by the chart above, the investment masses will almost certainly wait until gold prices are significantly higher before piling in. But when they do, the upside for those investors smart enough to be building a portfolio of quality junior gold explorers at this stage—meaning now—will be truly stunning.

In fact, I’m convinced that not only will the returns be much richer than in the 1979/1980 bull market… they’ll be so rich that even I’ll be surprised at how high the better companies go. This will be one for the books… don’t miss it.

[Ed. Note: The following is adapted from a comprehensive report, Gold Shares in a Gold Bull Market, in the December 1 edition of Doug Casey’s International Speculator. Doug Casey’s newsletter has been providing comprehensive research and unbiased recommendations on gold and gold shares for over 26 years. For a no-cost look at the full report, click here.]