WHAT IS ‘Gold Bull’
Gold bull is a term for an investor who is optimistic about a higher price for gold bullion, gold futures and related assets, and is positioned accordingly. A gold bull anticipates the price of gold increasing over a particular period. Gold bulls may be individual or institutional investors.
Gold bull also can refer to a market in which the value of gold is trending higher, as well as an analyst who advocates for gold and gold-related purchases.
Many central banks tend to have gold on their balance sheets, and as such, the European Central Bank, Bank of Japan and other world banks may sometimes be seen as gold bulls when they are aggressively purchasing gold bullion. Some gold investors tend to analyze the gold purchases of central banks, because these large, influential investors can move prices of the commodity.
BREAKING DOWN ‘Gold Bull’
Gold bulls may hold their views for many different reasons. Some may see the metal as just another commodity upon which to speculate. However, unlike the U.S. dollar and other currencies that tend to depreciate over time, many think gold is a better store of long-term value than the dollar and other paper currencies. One reason is that gold has been an excellent hedge against inflation in the past, because its price tends to rise when the cost of living increases. Gold prices have surged in years when inflation was particularly high, as was the case from 1971 to 1974. Because of this particular characteristic, gold is seen by some bulls as well as a way to pass on wealth from one generation to the next.
One of the greatest secular bull markets for gold took place from 1998 to roughly 2012, during which time the price of the precious metal advanced more than fivefold. Interestingly, the bull market began just before the dot-com stock bubble of the 1990s ended. A handful of investors deftly rotated technology-stock assets to gold-related assets just before the turn of the millennium.
HOWEVER, not all gold buyers are ‘Gold Bulls’
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 U.S. dollar’s value, perhaps due to political uncertainty or a global crisis, and they may transfer their other assets to gold. While it’s true that a dollar-bear will raise the price of gold, this type of investor may not be truly bullish on gold longer-term.
In addition, 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.