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Gold bulls have suffered years of disappointment, having seen their favorite metal’s price lose more than 40 percent from its all-time historic high of $1,924 an ounce in early September 2011.

Last year alone the price of gold fell some 10 percent, leaving many investors, analysts, and financial-market pundits despondent about the prospects for gold in this New Year.

What surprised us more than anything was the failure of extreme monetary stimulus from the U.S. Federal Reserve and other major central banks around the world to trigger and support a bull market in gold. Common sense suggests that the unprecedented creation of new money “out of thin air,” so to speak, would lead to massive inflation and devaluation of the dollar’s purchasing power.

But contrary to expectations, consumer prices have been worrisomely stable while producer and commodity prices have actually declined. Instead of inflation fears, economists and policy-makers are now worried about price deflation and slowing economic activity around the world.

Looking back over the past few years, we can see all this new money has fueled another form of inflation – not consumer-price inflation, but an inflation of equity prices on Wall Street and other major stock markets along with rising prices for real estate, fine art, antiques, rate coins, and other esoteric assets.

Meanwhile, gold has been left out of the inflationary mix, after all, the thinking goes, why hold an inflation hedge when inflation is hardly visible. Instead, better to hold equities and other assets that are rapidly appreciating.

True, many retail investors have continued to buy physical gold in the form of small bars and bullion coins. But these physical purchases have been dwarfed by the sale of paper gold derivatives and gold ETFs by large-scale speculators, a handful of bullion banks that make up the wholesale interbank market for gold, commodity funds, and other institutional players – many of whom have been sellers of gold and buyers of equities and other appreciating assets.

More than anything else, this massive flow of funds out of gold in favor of equities and other inflating assets explains why gold has faired so poorly in recent years.

But now the tide may be turning. Equity markets here and abroad have stumbled into the New Year . . . while gold prices have recovered some lost ground in early-January trading.

A period of day-to-day gold price gains and simultaneous declines in the broad stock-market averages could be evidence of a shift in investor attitudes away from stocks in favor of gold – signaling a new era for the yellow metal.

Moreover, when markets do turn, we would not be surprised to see gold prices rise briskly – continuing to new historic highs over the next few years.

One feature of gold’s bear market over the past four years has been a massive shift in gold ownership from West to East, from the older industrialized nations to the rising Asian economies, from paper gold and ETFs to physical bars, bullion coins, and investment-grade jewelry, from traders and speculators to long-term investors and hoarders – importantly from weak hands to strong hands.

When gold sellers become gold buyers once again the yellow metal’s price could rise to record heights as available supplies prove insufficient to fulfill demand from those that were so eager to sell in the past four years.

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