Gold’s bull run not over, it’s just taking a break

After five months of declines in gold prices, experts still believe its not time to call an end to gold's bull run. Those that have been paying attention to the markets know that governments embrace easy-monetary policy, the euro will continue to have significant problems, and currency wars will continue to escalate.

By Myra P. Saefong
March 1, 2013, 6:00 a.m. EST
Market Watch

SAN FRANCISCO (MarketWatch) — After five months of declines in gold prices, it’s still not time to call an end to gold’s bull run.

After all, the factors that contributed to gold’s fifth straight monthly decline — central-bank monetary-policy cues, economic data, currency fluctuations, asset relocation, and emerging markets — are generally the same as they’ve been for gold’s more-than-decade-long bull run.

“Many are declaring that there is no catalyst to drive gold forward,” said Jan Skoyles, head of research at The Real Asset Co., a precious-metals investment platform provider. “They’re right — the bullish drivers of gold haven’t changed at all for several years.”

“Those that pay attention to the markets know that governments embrace easy-monetary policy, they know that the euro will continue to have significant problems and they know that currency wars will continue to escalate,” she said. “That is why gold’s bearish factors, such as improved U.S. data, have greater impact on the gold prices.”

Gold futures GCJ3 -0.32% fell about 5% last month to tally a loss of around 11% since the end of September.

An improvement in economic data out of the U.S., more recently positive figures on housing, has helped to dull gold’s appeal as a safe-haven investment.

Strength in the U.S. dollar, with the ICE dollar index DXY +0.41% climbing more than 3% in February, also pressured gold, making the metal more expensive for holders of other currencies to buy.

But bearish factors such as those won’t necessarily succeed in ending gold’s bull run, said Skoyles.

Instead, bullish factors such as the worries over the euro, easy-money policies and currency wars “will culminate in such a way that increasing numbers of investors … will turn to look for assets which are not depreciating in value and which governments cannot meddle with,” she said. A currency war refers to a competitive currency devaluation by countries trying to ease strength in their currencies.

“The gold bull run is not over, it just doesn’t need to rush to wherever it’s climbing to,” said Skoyles. Hit hard

Still, investors can’t help but question whether gold headed for more losses after its weak performance over the last several months.

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