The 10-year gold
bull market in perspective
About the World Gold Council
The World Gold Council is the market development organisation for the gold industry. Working within the investment, jewellery and technology sectors, as well as engaging in government affairs, our purpose is to provide industry leadership, whilst stimulating and sustaining demand for gold.
Lessons from prior asset bubbles
Comparing gold with global asset prices
Gold and the interest rate cycle
We develop gold-backed solutions, services and markets,
based on true market insight. As a result, we create structural shifts in demand for gold across key market sectors.
The outlook for gold demand
We provide insights into the international gold markets,
helping people to better understand the wealth preservation
qualities of gold and its role in meeting the social and
environmental needs of society.
Based in the UK, with operations in India, the Far East, Turkey, Europe and the USA, the World Gold Council is an association whose members include the world’s leading and most forward thinking gold mining companies.
For more information
Please contact Government Affairs:
+1 212 317 3850
Director, Government Affairs
+44 20 7826 4707
Managing Director, Government Affairs
+1 212 317 3848
The 10-year gold bull market in perspective
Reserve managers and investors are increasingly recognising
the strategic case for including gold in a portfolio due to
its diversiﬁcation beneﬁts and the protection it can aﬀord against macroeconomic risks. However, successive new
records in the gold price have increased concerns that gold
may be overvalued vis-à-vis other assets. Some investors
and market commentators even question whether the gold
market is in a “bubble.”
In this paper, the World Gold Council takes a statistical
approach to these concerns and examines the prospects for
future gold demand. Through our analysis we examine the
statistical characteristics of prior bubbles to assess current developments in gold. Unambiguously, the results show
that gold price developments do not resemble the statistical characteristics of past bubbles, including those of the US
housing market, the Nasdaq technology bubble, and the
Japanese Nikkei equity market bubble. Additionally, we ﬁnd that the gold price is consistent with its long-run average level compared with a range of diﬀerent assets including equity
indices and hard assets like oil.
Furthermore, we demonstrate that the outlook for gold
market demand remains robust, due among other reasons,
to the strength of emerging markets, a fundamental shift
in the behaviour of central banks, and a recovery and new
advances in industrial demand for gold.
Lessons from prior asset bubbles
Steady increase in investment ﬂows
A statistical approach
Gold demand has beneﬁted from ﬂight-to-quality ﬂows
associated with the ﬁnancial crisis and the measures put in place to remedy it (namely, quantitative easing from the world’s central banks). This is evident from the sharp acceleration in gold investment that occurred in 2008, when macroeconomic
and ﬁnancial market uncertainties were most pronounced.
However, today’s gold price is by no means simply a reﬂection of those inﬂows. The ﬁnancial crisis began around mid-June 2007, while the rally in the gold price began ﬁve years earlier, in 2001-2002. Over the past ten years, the gold price has
increased in periods of stagnant – or even declining – investment, not just during periods of heightened investment demand.
For example, between Q1 2002 and Q1 2004 identiﬁable
investment inﬂows into gold fell by 21% from 126 to 99 tonnes, while the gold price increased by 41%. Also between Q2 2006
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