Gold enters a new bull market, says WGC
London (Apr 8) Gold outshined the market in first quarter of 2016 and is poised to eneter a new bull market, says the World Gold Council(WGC). The gold price staged a spectacular rally in the first quarter of this year, rising by 17% in US dollar terms.
The rally was gold's best performance in almost three decades, significantly outperforming other major stock, bond and commodity indices. "Gold outperformed other asset classes, including major equity indices – some of which posted outright declines – investment grade and high yield bonds, as well as the commodities complex, including oil," according to WGC.
WGC says the rally has been supported by five key factors:
1. Ongoing concerns about economic growth and financial stability in emerging markets
2. A hiatus in the rise of the US dollar
3. The implementation of negative interest rate policies by leading global central banks
4.The return of pent up investment demand for gold
5. Price momentum (i.e. investors following gold’s upward trend)
WGC says these factors will continue to support both investment and central bank demand in the coming quarters. Combined with an analysis from past bull-bear cycles, this suggests that we may be entering a new bull market for gold.
"Historical analysis of previous bull-bear market cycles is also encouraging. Gold has experienced five bull markets and five subsequent bear markets since the 1970s," says WGC.
Previous bear markets (excluding the current one) have had a median length of 52 months, during which the price of gold declined between 35% and 55%. As of December 2015, gold’s price pullback was already in line with the median length and magnitude of these previous bear markets.