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Is gold in bull market or bear market conditions? How does gold’s current position compare to other investment types, like stocks, bonds, and cash?
- A bull market describes a rising market with positive economic trends and outlooks.
- A bear market is the opposite, describing a declining market trend with pessimism toward economic performance across most major industries.
However, the value, prices, and trends in gold and precious metal investing tend to run inversely to stocks and bonds. That’s because when investors aren’t as confident in the economy, they turn away from volatile stocks and other cash investments to buy gold instead. So, bull markets in gold buying tend to occur when stock markets are bearish and vice versa.
So, given the state of things, would gold be in a bull market right now? And what does that mean for gold investors or those looking to get into precious metals? Let’s take a look below.
What Is Driving the Gold Market Now?
Several factors influence the market cycle and the current price of gold. Traditionally, gold acted as a safe haven asset, hedging people’s portfolios against inflation and stock market volatility. Today, not much has changed.
Investing in gold will hedge your portfolio against elements like geopolitical risk and economic uncertainty, both domestically and abroad. So, what are the primary events or trends currently affecting gold prices and demand in the United States and global markets?
Top Three Factors Influencing Gold Prices
Why are gold prices moving up to make it a bull market for gold buyers and sellers at the moment? As with stocks, mutual funds, and other investment vehicles, several factors influence the price of gold and how much faith investors have in their precious metal holdings.
- Forecasts by experienced gold market experts are one key factor. Investors place their faith in these projections to determine whether to invest in gold.
- Price hikes due to central bank purchases can also drive a bull market.
- Long-term price targets announced by large gold-buying investment firms may also influence individual investors who then choose to add gold to their portfolios.
Here’s how these factors work together to drive gold prices and purchases.
Forecasting the weather is not an exact science, and neither is forecasting gold prices. While expert predictions can be wrong, gold forecasts do influence investor confidence. It’s also helpful to note that gold can experience much longer bull and bear markets than the stock market, such as the 14-year bear market between 1987 and 2001.
So, how do experienced gold experts forecast the future price of gold? Financial experts often compare gold prices to other commodities and assets, including the U.S. dollar and average stock indices. They also look at oil and other precious metals, like silver.
Forecasting gold prices calculates trends based on numerous past data points and compares these trends to forecasts in other markets. For example, the gold-oil ratio has favored alternative energy over oil, slowing gold buying trends among many investment firms. Additionally, the increase in the price of silver has been nearly double the comparable increases in the gold price.
So, is gold in bull market conditions at the moment? Well, recent trends are indicating an upward trend in gold value and the oil price leveling off. That’s why so many experts are calling for an extended bullish trend in gold prices in the coming years.
Central Bank Behavior
Adam Rozencwajg of Goehring & Rozencwajg claims the new gold bull market began in the second half of 2022. Central banks began buying gold then after offloading bullion during the COVID-19 shutdowns of 2020 and 2021. In fact, those central bank purchases of gold in late 2022 exceeded any notable gold purchases made since 1971, when the global economy moved away from the gold standard.
Since the central bank policy does not wait for prices in gold to fall before buying, they aim to replenish the gold stores in their vaults with price-insensitive purchases of gold. This move can drive the average price of gold higher, too.
Another factor influencing central bank gold purchases is that many foreign banking institutions believe the U.S. dollar may lose its reserve-currency status among emerging economies. The huge geopolitical risks and heightened inflation after the war in Ukraine and the subsequent U.S. decision to freeze Russian reserves could also lead to long-term shifts in central bank policy.
Long-Term Price Target
Rozencwajg also confidently estimates gold could reach five figures in the long run. This price target might seem outlandish for some investors, but G&R describes several factors that have influenced their reasoning.
Firstly, the government holds gold in storage and a certain amount of money in circulation, what G&R and other experts refer to as “implied gold backing.” Commodities purchased with paper money have that gold value applied in gold price forecasting.
Also, high prices are only beginning to come down after extensive policy changes to support national and global economies after COVID-19’s emergency economic measures. As more of these economies stabilize and inflation decreases, more investors will begin seeing gold as a safe haven asset against inflation.
Current Market Phase and Indicators For Gold Buyers
Is gold in bull market status? At the moment, it takes several more dollars to purchase items than it did five years ago. During such inflationary periods, commodities are often undervalued, especially since the prices rise and fall between periods of undervalue and overvalue.
Coming out of a current period of undervalue, gold and other commodities are in a prime position to enter a bullish period (before becoming overvalued). So, investors who get in on gold purchasing and hold it until the peak of the bull market may earn significantly higher returns.
Similarly, investors in the late 1920s or early 1930s would have seen over 100% in returns if they sold their gold in 1940. The stock market fell by approximately half in that same period!
Expert Opinions on the Gold Market
Argonaut’s Eddie Rigg and analyst Barry Dawes of Martin Place Securities both agree that gold is on the rise and that this will continue. Their outlook is positive despite ongoing inflationary pressures raising costs for miners in many of the world’s central goldfields.
One article from Investing Haven also cites the current price of the Euro, bond yields, and inflation as their top three predictors for gold prices continuing to look positive. They estimate a long bullish trend over the next several years, boldly citing a medium and long-range price target per troy ounce to reiterate their position.
However, according to a summary from CAPEX, the international banks cannot agree among themselves on gold price forecasts. Some predict increases, with Saxo Bank forecasting even higher than the average. Others like Societe Generale forecasted the price to decrease by more than half by the end of the year, though five-year estimates still put the price of gold way ahead.
Learn More About Gold Investments With the Oxford Gold Group
Is gold in bull market conditions right now? As it emerges from this bearish trend (although not a true bear market by definition), experts are indeed predicting bullish trends, possibly for a decade or more. If you’d like to learn more about gold trends, investing in a gold IRA, or buying gold, chat with Oxford Gold Group—contact us today!