Gold has entered the third bull market of my lifetime. The first bull market was 1971-1980 when gold gained 2,190%. The second bull market was 1999-2011 when gold gained 655%. The third bull market started in December 2015 and gold is up almost 30% already.
The new bull market should have many years to run and should produce gains of 700% or higher as the price of gold makes its way to $10,000 per ounce. Still, that will take some years and there will be rallies and drawdowns along the way.
For investors focused more on short-term technical factors rather than long-term secular trends, there is also good news. This article reports that January-February are typically good months for gold partly because of strong Chinese demand associated with the lunar new year. This was certainly true in 2016 and 2017, and it’s proving true so far in 2018.
Personally, I put more weight on Fed rate hikes in December 2015, 2016 and 2017 that slowed the economy and pointed toward future Fed ease and lower real rates. In fact, the Fed did not hike rates in March 2015 or March 2016 (the first press conference FOMC meetings following the last two December rate hikes), and that ease relative to expectations did validate those gold rallies early each year.
We’ll see what happens in March 2018. My estimate is the Fed will hike rates this March, but that will just make ease in June all the more likely, so gold still has the forward forecast right. Whether you follow the Fed or the moon, the news is good for gold either way!