– 4 reasons why “gold has entered a new bull market” – Schroders
– Market complacency is key to gold bull market say Schroders
– Investors are currently pricing in the most benign risk environment in history as seen in the VIX
– History shows gold has the potential to perform very well in periods of stock market weakness (see chart)
– You should buy insurance when insurers don’t believe that the “risk event” will happen
– Very high Chinese gold demand, negative global interest rates and a weak dollar should push gold higher
This week gold broke through the key resistance of $1,300. For some time market commentators have been signalling this level as the point of entry for a new bull market.
Often price can be distracting when it comes to trying to figure out what is going on. Two Schroders fund managers called the new bull market in gold about a week before the price broke through the key level.
Gold has entered into a new bull market. As we have discussed previously, there are four main reasons for our stance:
- Global interest rates need to stay negative
- Broad equity valuations are extremely high and complacency stalks financial markets
- The dollar might be entering a bear market
- Chinese demand for gold has the potential to surge (indeed, investment demand in China for bar and coin already increased over 30% in the first quarter of 2017, according to the World Gold Council)