Three Questions to Ask Before You Declare the Gold Bull Dead

Gold and silver had an abysmal day on Tuesday (Aug. 11). The price of gold dropped more than 5%, falling far below the $2,000 level. It was the worst single-day rout in seven years. Things stabilized somewhat on Wednesday with apparent support above $1,900, but the big selloff fueled speculation that the gold bull run could be over.

Here are three questions you should ask yourself before declaring the gold bull dead.

1. Do you believe the economy can quickly recover? Let’s say they develop a coronavirus vaccine tomorrow. Do you believe that the economy can just spring back to life?

2. Do you believe that the federal government will stop borrowing and spending billions of dollars every single month anytime soon? Keep in mind, the federal government was borrowing and spending billions of dollars a month before the pandemic.

3. Do you think the Federal Reserve is going to stop printing money, raise interest rates and shrink its balance sheet in the near future? Likewise consider that the Fed was slashing rates, printing money and growing its balance sheet before the coronavirus reared its ugly head.

If you answer no to any of these questions, pronouncing last rights on the gold bull market might be premature.