BIG SENTIMENT SHIFT IN GOLD. IS THE GOLD BULL BACK?

The first quarter of the year marked a volatile period for equities across the globe. As is often the case when volatility persists, investors and traders turn towards safe havens – one of which is gold. The precious metal performed outstandingly during the first quarter, and for the first time in several years, a significant level of demand for global gold ETF’s and funds was observed. While previous years saw moderate net outflows in these instruments, the first quarter of 2016 saw a 363m build in gold ETF’s and funds – the second largest level on record, and only behind that of Q1 2009, when the effects of the GFC took hold.

What is apparent this time around however, is that the US stock market is not that far off its all-time high – in fact, it’s only about 15% off, as opposed to the depths it reached during the GFC. As well as this, the World Gold Council wasted little time in analyzing the trends of bull and bear markets for gold since the 1970’s. They established that bear markets were typically hit by a 44% decline – almost exactly the same level of decline as at December 2015, before gold started its most recent recovery. Conversely, the average bull market saw a 385% increase – even the smallest bull run was a notable 27.2%.

With the market recovering most of its losses from the beginning of the year, and gold prices having increased notably in the same period, the question remains – what will happen to gold when the market resumes a downward trajectory? All eyes will remain focused on volatility within global stock markets, the Chinese growth story, and of course, the Federal Reserve’s interest rate decisions. With each of these factors acting as a catalyst to spur further demand for gold assets and increase the precious metal’s price, it’s apparent that the gold market might be back in favor with investors.

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We currently don’t hold any positions in gold, but on the basis of the above, will be looking to buy gold investments in the next few weeks.