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By Stuart Burns

Is the fall in the gold price an opportunity to buy on a dip, or the end of the bull market?

It is probably not an exaggeration to say billions of dollars probably swing on that question.

The gold price has slumped to around $1,580 per ounce over the last few days, down $100 on a month ago, and down 18 percent from the highs of 2011. After annualized price increases of 20 percent since 2002, many are asking, is this the end of gold’s decade-long bull market?

Even as Jack Farchy, interviewed for the FT’s Short View, observed, if it breaks below $1,500, it could drop much further.

One significant difference during this sell-off compared to, say, the last two months of 2011, when the price experienced a 13 percent fall, is the accompanying sell-off by investors, particularly the ETFs.

In 2011, the ETF community hung in there and prices came back, but this time, there has been a significant sell-off, the FT reports. Since the start of January, gold ETFs have dumped 140 metric tons of gold. February saw the largest monthly outflow of gold from ETFs on record, and Comex has chalked up the highest level of short positions in more than a decade.

Why do ETFs matter so much this time?

Well, sheer scale is one reason, as the FT explains. With some 2,491 tons of gold held around the world, collective ETF holdings outnumber all but two central banks: the U.S. and Germany. ETFs hold enough gold single-handedly to supply the jewelry market in India – the world’s largest consumer of the metal – for more than four years.

In addition, investors in ETFs have generally been seen as long-term players, often pension funds and trusts who hold the metal as part of a diversified portfolio. But the sell-off is raising questions as to whether investors are no longer worried about holding a perceived hedge against currency debasement and are preferring to plow their money into equities in the expectation of a recovery in global GDP.

Sentiment has not been helped by Goldman, Credit Suisse and Société Générale…continued in Part Two.

Source: Is This Finally The End Of Gold's Decade-Long Bull Market?