Signs That Gold Has Officially Moved To A Bull Market

Thursday, April 14, 2016

Bull markets aren’t always easy to discern. Too often, investors hear that a bull market has arrived in one particular sector, only by then, the real gains to be had are too little and too late. As famous investor Warren Buffet likes to note, it’s usually a better idea to not follow the herd in most respects - that’s when you truly can buy low and sell high.

But what about a potential bull market in gold? Is it really here and, if so, might now be the time to invest? Gold has seen a healthy 2016 to be sure. Whether or not that means gold has truly entered a strong bull market for the remainder of the year is a different question entirely. As is the case for many investment trends, it’s better to know before the bull market fully takes off. That’s why we’ll look at some recent signs of a bull market in gold.

Who Is Buying Gold, And Why Does It Matter?

To first evaluate whether there’s going to be a bull market in gold (and, remember, we might already be in one—it’s only later on in the market when people begin to realize it), you have to know who is buying. It’s not enough that Aunt Edna is buying gold; the big players need to believe in the bull market as well. So let’s take a look at who is buying gold as of late:

  • Central banks. This is perhaps the most important sign. According to the Telegraph, the latter half of 2015 saw a record-high in gold purchased by central banks, with some 336 tonnes moved.
  • Private investors. Private investors may not individually hold the sway of any central bank, but when overall demand is up, it has an impact. Charles Morris of the AtlasPulse report believes that investor engagement drives gold much like stock prices—when investors move, so too does the price of gold.
  • Jewelry demand. It might not have the sway of private investors and central banks, but it’s important not to forget that jewelry does have a say in the gold market, with a big portion of gold demand every year.

Diagnosing The Bull Market

These are all signs of a bull market, but increased demand is not enough to conclude that gold will accelerate and continue to accelerate for the remainder of the year. Like a Wikipedia entry that says “[citation needed],” we have to do our due diligence if we’re really going to know where gold is pointing. If only someone like the World Gold Council had weighed in…

and it did. Said a recent report, “Combined with an analysis from past bull-bear cycles, [data] suggests that we may be entering a new bull market for gold.”

Citing a “hiatus” in the US dollar, concerns about the economic outlook, price momentum and even more variables, the World Gold Council’s report was extremely confident about the price of gold after reviewing first quarter data.

That’s no total guarantee of a bull market. However, when all of the signs are there…you do have to wonder. 

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.