Gold: The Ignored Bull Market

In a Moneyweb blog post, the opinions of Prieur du Plessis regarding gold are excerpted. In a nutshell, du Plessis believes that gold has been in a hidden bull market because more attention has been focused on equities rallying. Over the first decade of this century, gold has handily outperformed MCSI World Index stocks even when dividends are factored in.

Du Plessis goes on to draw attention to gold’s recent price action (see accompanying graph). “While we did see gold pull back to below the $1 100 level in December last year when the dollar initially started to rally, and has been toying with this level since the beginning of the year, it has now succeeded in surpassing the $1 100 once again in the face of continued dollar strength,” he points out.

Du Plessis is of the opinion that this is very significant and could be a sign that gold is preparing to break out to the upside. “Despite the continued global economic expansion, investors are concerned about the mediumterm outlook,” says du Plessis. “What effect will China’s efforts to cool down their economy have on the global economy, especially in the light of the debt problems in the eurozone? Added to this is the enormous US budget deficit, reckless money printing resulting in looming inflation and a fiat currency of which the world is becoming more and more sceptical.”

He also adds that gold as portfolio insurance has no special season; a position can be entered into anytime.


Once again, gold's present status as an alternative investment is confirmed. The bull market has been long, but it's also been out of view of most. As of now, though, the gold-as-portfolio-insurance theme is spreading through the financial mainstream. More people are introducing themselves to gold. And, as many have noted, there's no incipient gold mania. I note, though, that the shift towards seeing investment demand as effectively permanent is planting the seeds for one. Although it'll take a good showering of inflation for the mania to grow, said fever is moving to the germination stage.