Gold's prospects for a sustained price rally are better than they have been for years as a weaker dollar, crashing oil prices and concerns about the global economy have revived its safe-haven status after years as the dog of global financial markets.
The precious metal has climbed 20 percent so far this year to $1,260 an ounce with money managers eyeing $1,300 to $1,400 in the next six to 12 months.
explains it has seen three signs that the recent bear market is over.
"Assuming the fundamental argument of the gold bulls is correct and a rising dollar supply means rising price inflation means a rising gold price (and over the last century that is certainly the case), the question is did we just see a major trend change? What follows are three major signals that we have," Seeking Alpha's "Austrolib" reported. "The conclusion being that this stage of the gold bull market since 2001 could be the wildest yet."
A Pattern of Gold Stock Outperformance
The second confirmation is a pattern of gold stocks rising in the face of declining gold.
Overall, since bottoming, gold stocks have outperformed gold by a factor 5.2 times, compared with the 2.9 times of 2008. The rise out of the 2008 gold bottom saw outperformance by gold stocks over gold both on the way up and the way down.
3 Consecutive Monthly Gains
If March closes higher for gold stocks, it will be the first time since 2011 that they have seen three consecutive months of gains. This happened 10 times during the 2001-2011 bull market, but never during the bear market.
2008 vs. 2016 Bottom
The last time a gold bear market bottomed, albeit a little bitty one by time, was March to October 2008. In that window, gold dropped 34% in 8 months.
After such a long downturn in gold, the recent rebound has been remarkable, said Matt Hougan, chief executive officer of Inside ETFs. "For the sector to turn around in such a short period of time and lead all ETFs, it's pretty incredible," he told Reuters.
If you think of gold as an all-or-nothing trade, a "safe haven" replacements for equities and even bonds when markets are volatile, there's a big risk to sticking with the precious metal for too long.
Ben Johnson, director of global ETF research at Morningstar, noted that when the economy rebounded from 2012 through 2015, "investors who stayed hunkered down in gold likely missed the rally in the equity markets and the ongoing rally in the fixed-income markets as well."
(Newsmax wire services contributed to this report).
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