What is a 'Gold Bull'

Gold bull is a term for an investor or trader who is optimistic about the spot price of gold bullion, gold futures, and other related assets increasing in the future. These gold bulls position their portfolio accordingly. Gold bulls may be individual or institutional investors.

Gold bull also can refer to the market situation, in which the value of gold is trending higher, as well as an analyst who advocates for gold and gold-related purchases.

BREAKING DOWN 'Gold Bull'

In a secular market, gold bulls may hold gold for an extended amount of time. Secular markets last for many years and tend to have multi-year above-average returns. One of the most significant secular bull markets for gold took place between 1998 and 2012. During this time, the price of the precious metal advanced more than fivefold. Interestingly, the bull market began just before the bursting of the dot-com bubble at the end of the 1990s. A handful of investors and traders deftly rotated technology-stock assets into gold-related assets just before the turn of the millennium.

A gold bull will research and use fundamental analysis to anticipate when the price of gold may increase over a particular period. Gold traders will follow the purchase of gold by central banks because these big purchases can move the price of the commodity. Many central banks hold gold on their balance sheets, including the European Central Bank, Bank of Japan (BoJ), the U. S. Fed, and other world banks. These banks may be seen as gold bulls when they are aggressively purchasing gold bullion.

Types of Gold Bulls

Gold bulls may hold their favorable view of the metal for several reasons.

  • Some see the metal as just another commodity upon which to speculate. Profiting from speculating on gold by holding or buying it can depend on several factors, including the expected duration of the holding period, and the amount of leverage involved. 

  • Some gold bulls may use gold as a hedge against inflation. Unlike the U.S. dollar (USD) and other currencies that tend to depreciate over time, many think gold is a better long-term value than the dollar or other paper currencies. This viewpoint comes from the history of gold as an excellent hedge against inflation. Historically, as the cost of living increases, the price of gold will rise. As an example, in the years between 1971 and 1974, inflation was unusually high, and gold prices surged.

  • Gold is also a way to pass on wealth from one generation to the next. Gold coins can appreciate in value from both its value as bullion, but also from its value as a collectible. Under the U. S. tax code, all gold receives the classification of a collectible. A recipient can get up to $10,000 without having a tax obligation.

Mistaken Identity of Gold Bulls for Dollar Bears

Gold is priced in U.S. dollars in most markets around the world. For this reason, a gold bull may be confused or mistaken at times for a dollar bear. In a dollar-bear market, investors anticipate a decline in the value of the U.S. dollar (USD), perhaps due to political uncertainty or a global crisis. They may transfer their other dollar assets to gold. While it’s true that a dollar-bear will raise the price of gold, this type of investor may not be genuinely bullish on gold longer-term.

Also, some may use gold mainly as a way to hedge investments in real estate, equities, and other asset classes, since gold prices are not closely correlated to those asset classes. These investors may not necessarily be gold bulls either.

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