Is Gold Dead?

bear and bull gold

One Seeking Alpha contributor seems to be fairly certain that it is. He states clearly that:

“We are in a secular bear market for gold (and other hard assets) which began in February 2013.”

Now, there is a lot of debate surrounding this topic, and a case can – and often is – made for both bulls and bears. This particular investor has actually been bearish since 2011 and predicted a gold crash in October of that year, when gold was priced at $1,644 an ounce.

Since gold happens to be under $1,200 at the moment, that might seem to lend weight to his argument. However, gold is not an investment that is meant to last forever like a blue chip stock, passing down through generations. The precious metal is routinely influenced by external circumstances for that to be the case.

Additionally, the two main factors he is using to support his thesis are not quite as concrete as you may want to consider when making an important decision. Let’s take a quick look at them here.

Dollar Strength

“A rising US dollar is to gold what kryptonite is to Superman.”

Well, no, not quite. While gold does often track the dollar, it is not 100% consistent in doing so. Furthermore, although the dollar has been at record strengths in recent weeks, there have been some signs that there may be some weakening ahead.

Still, the dollar is a significant factor, and one worth considering. However, a great many people choose to see those times as buying opportunities. It is really a different reason that seems a bit far-fetched.

Gold Reserves

He seems to believe that central banks will be selling all their gold reserves. As this article by U.S. Global Investors points out, both Canada and Venezuela have sold most of theirs, so this claim may not be as outrageous as it looks on paper.

Yet, as that same article illustrates, the United States still has the largest gold holdings in the world. In fact, just last year, many central banks bought more gold instead of selling what they already had.

So, if anyone should mention this as a possibility in making a case for being a gold bear, you probably don’t need to give it much weight.