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What can stop the gold bull run?

By Giles Coghlan, Chief Currency Analyst at HYCM

Cast your memory back to the strong run in precious metals from 2008 during the global financial crisis and you will be able to remember the strong run in gold prices. Back in 2008/09 there were an abundance of gold articles at the time and you couldn’t even take a trip without seeing one of those pop up shops trying to purchase spare/unwanted gold. It was a real gold fever. Well, with gold rising above recent highs we have returned to that fever pitch hunger for gold. However, what can stop it?

Gold demand is high and google shows it
The google searches for the phrase ‘buy gold’ are currently at unprecedented levels. Levels which were last seen in August 2011 a few weeks before the previous gold high at $1921. The huge number of stories with the phrase ‘gold price’ in are at the highest level since 2013 and the online retailer ‘Bullion Vault’ which sells vaulted allocated metal to retail clients has seen its strongest first seven months since opening in 2005. Furthermore, the strong demand for gold ETF’s now even exceeds Germany’s official reserves! Gold mania is here!

But what can stop the bull run?

Well, the 2008 bull’s run was ultimately stopped by the Fed being ready to taper its QE programme in 2013. In 2008 the fear was that QE would precipitate hyperinflation and gold is seen as the hedge against inflation. So, as long as real rates are perceived to be going down that can fuel gold and silver’s rally. However, the gold bubble burst when tapering was announced by the Fed. So, will we see the same reaction again? It is impossible to tell, but certainly worth bearing in mind going forward. Yes, there will be ebbs and flows in gold and silver’s move higher, but we are now in the mania stage and it is really meaningless to pick a top target at this stage. It will take an unforeseen/unexpected event to change the rally higher right now and many traders will be looking to buy on the dips.



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Thursday, 06 Aug, 2020 / 8:09

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