The bull market for gold could be in jeopardy now that the war has broken out. Even the top gold funds are losing some of their lustrous appeal, with the average gold fund now down 11.3% year to date. Investors who placed speculative bets in that arena in recent months with the hopes of a continued winning streak are second-guessing themselves.
Some industry experts believe that gold will behave as it did during the Persian Gulf War. At that time, the price of gold dropped more than $40, to $366 an ounce once U.S. troops began to oust the Iraqi army from Kuwait, thus eliminating the risk premium.
By the time the war ended in March 1991, the S&P 500 jumped 18%. Given the historical parallels between now and then, momentum traders are shorting their positions in both gold and oil.
"Long term, the bull market for gold is still intact [but] short term, it is going to drop," said Leo Larkin, an equities metals analyst at
