Gold Has Officially Moved Into The Bull Market!

Friday, March 4, 2016

Gold has had one heck of a start to the year 2016. Since the first day of trading in the year, the value of the precious metal has climbed dramatically. Now, there's a big question rising with regard to the precious metal. Will gains continue? Today, we'll talk about why we've seen the gains, when gold officially reached bull market territory, and whether or not gold is likely to keep running with the bulls. So, let's get right to it...

What Caused Gold To Climb

As mentioned above, the value of gold has been moving upward since the beginning of the year 2016, and the gains have been happening for a few very good reasons. Here's why the precious metal has been climbing...

  • Supply – As with any commodity, the value of gold is largely at the mercy of supply and demand. Therefore, when supplies are expected to decline, we can expect to see gains in the value of the precious metal. That's exactly what we're seeing. In fact, we recently heard news that gold has reached peak supply. This means that production of the precious metal is likely to decline over the next several years. This is lending support to the price of the precious metal.
  • Demand – The other side of the equation is demand, and believe it or not, demand for gold is supporting the massive gains in price that we've been seeing as well. There are a couple of signs that demand is climbing and likely to continue. First and foremost, gold is considered to be a safe haven investment. Therefore, when market or economic conditions are expected to be negative, investors move to gold as a way to keep their money safe, leading to massive increases in demand, and ultimately price. With the market conditions in the dumps and the global economy struggling, investors are moving toward gold more and more lifting demand and causing the value of the commodity to climb. Another factor that shows an increase in the demand for the precious metal is the US mint. In the month of January, the Mint sold record numbers of gold bullion coins, showing that demand among gold coin collectors is climbing as well.

Between these two factors, we've seen exponential growth in the value of the commodity, leading gold into bullish territory.

When Did Gold Reach The Bull Market

A transition from a bear market to a bull market is signified by gains of 20% from bear market lows. Today, that transition was made. On December 17th, gold reached a low of $1,049.60 per ounce, the lowest we've seen in nearly six years. However, today, the value of the commodity reached an intra-day high of $1,269.30. This signifies a jump of $219.70 from bear market lows, a 20.9% climb. So in a technical sense, today, gold broke into the bull market!

Will The Bullish Movement Continue?

This is the million dollar question... quite literally. The reality is that I don't have a crystal ball that allows me to look into the future, and no one else does. However, looking at the fundamental data surrounding gold, it's looking like the bull market is here to stay for some time. The reality is that the conditions leading to the growth in the value of the commodity are not short term conditions. First and foremost, peak supply is a long term production growth problem, and until new mines that are much more productive are found, we're going to see production declines. On top of that, the market has been gaining incredibly over the past several years, even though fundamental data did not support the trends. Now, the fundamentals are catching up to the market, driving values down... this is likely to continue for some time. Finally, economic conditions around the world are far from positive, and it takes quite a bit of time to turn around negative economic conditions, no matter you are!

Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report, Investing.com, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at cnafinancehelp@gmail.com.