Is Gold Entering a Bull Market?

Urged on by a US a weaker dollar, the gold price broke through $1,300 last week. While the gains were for the most part short lived, with gold price falling back below $1,280, the uptick gave them market some hope that things may finally be looking golden afterall.
Gold prices have been on a pretty steady uptrend since the beginning of the year. Having ended 2015 at $1,060, gold is currently back up at $1,276, a 20 percent increase from the start of the year. In light of the surging gold price, market players are starting to talk about gold entering a bull market.

One of Wall Street’s largest banks, JP Morgan, is recommending clients to get ready for a “new and very long bull market for gold”. The firm’s Solita Marcelli told CNBC’s Futures Now that with a 20 percent rally so far in 2016, gold looks to be gearing up for higher prices. “$1,400 is very much in the cards this year.” Marcelli said.

That said, JP Morgan is not the only proponent of gold. Hedge manager Paul Singer has also noted that gold has seen its best quarter in 30 years, highlighting what could be just the beginning of a rebound. “It makes a great deal of sense to own gold. Other investors may be finally starting to agree,” Singer told clients in an April 28 note. “Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies.”
Likewise, BNP Paribas SA is also optimistic that over the next 12 months investors could see gold climb to as much as $1,400, “citing rising investor concern about the efficacy of central banks’ policies to sustain growth.”
Also advising investors to get into the gold market is legendary billionaire investors Stanley Druckenmiller, citing the Trump presidency acting as a “very real threat to global financial stability” and waning effectiveness with monetary stimulus as the main drivers for his opinion. “The bull market is exhausting itself,” Druckenmiller told investors at the Ira Sohn Investment Conference, advising that they should “get out of the stock market” and buy gold. “Some regard it as a metal, we regard it as a currency and it remains our largest currency allocation,” he said.
Indeed, as Marcelli told CNBC, “gold is looking more and more attractive every single day,” adding that as a “nonyielding asset, it has a minimal storage cost, so when you compare it to negative-yielding assets, it actually has a positive carry.”
All said, with prices still at below $1,300, perhaps it is time for investors to start setting themselves up for a bull run in the gold market.
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Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.