Gold has been a seriously bad investment for the past four years. That hasn’t discouraged the Gold Bugs who remain bullish on gold no matter what. They see gold as the only safe harbour and believe that its value must go up given all the madness in the world. Perhaps the recent price activity in gold marks a new dawn for the Gold Bugs?

Gold reached its peak price in August 2011 when the price went momentarily above $1,900 per troy ounce. The rise had been spectacular considering that in early 2005 the price was around $430. The Gold Bugs were excited at the peak and sure enough, there had been a lot of distress and panic in the financial markets. In other words, there were many things you could use for explaining the stellar performance of gold and I remember how the Gold Bugs predicted that there’s no limit how high the price can go.

You can imagine the disappointment when gold prices in fact did not continue to climb higher. In April 2013 the disappointment turned into shock when the gold market saw its biggest one day sell-off in 30 years. It was ugly. Since the summer of 2013 gold has been moving sideways in the $1,100 – $1,300 price range. It’s interesting to notice that the psychologically important support level of $1,000 has not been broken.

I have to admit that I have a lot of sympathy for the Gold Bugs. With all the "bad news bombardment”, central bank money printing, and outright dystopia going on, it’s difficult not to become a Gold Bug yourself. Gold is the ultimate insurance policy if structures start to crumble for real. Structures such as the European Union, the government bond market, fiat currencies, and the global financial system in general.

Gold has been used in commerce for ages. Since the bronze age to be precise. There is no doubt that you will be able to buy stuff with gold in the future as well, even if everything else is gone. Hence the term insurance policy. Notice that this means you need to own physical gold. And preferably store it outside the U.S. and EU, as the investor and permabear Marc Faber always likes to point out.

What determines future gold prices is a completely different question. Just like with oil prices, it’s not just an issue of supply and demand. There’s a lot of psychology and crowd behaviour involved. Now that gold has broken trend lines and the 200-day moving average, we might just see the beginning of a new gold hysteria. The fact that everybody is following the same technical price indicators will just amplify the effect. There are also enough crises and fear all over the world, which is always good for gold prices.

I predict that we’ll be hearing a lot about gold during this year. Many pundits will come out and call a bottom in the gold market. It’s the Return of the Gold Bugs.