Since peaking at $1,900 per ounce in September 2011, the price of gold has dropped nearly 22%, to last Friday’s close of $1,483. Labeling himself an “inveterate contrarian,” John Stoltzfus, chief investment strategist at Oppenheimer, suggests that a near-term bounce might be in order.

Gold’s decline has been especially sharp recently, plunging from the $1,675 level in early February of this year. According to Stoltzfus, this weakness has been caused by a “powerful stock market rally, a strong dollar, the recent commitment of the Japanese government to a QE regimen, as well as investors’ disillusionment with the metal’s performance during the height of the Cyprus crisis and again now throughout the bellicose tirades of North Korea’s new dictator.” That is, investors expected a panicked flight to gold during recent highly-publicized crises; when that didn’t happen, selling picked up.

Stoltzfus denies that he is a “gold bug,” pointing to the metal’s inability to provide revenues, earnings, dividends or dividend growth to explain his lack of enthusiasm. Nevertheless, he sees some reason to expect gold prices to prices to rebound soon. “Gold remains an offset to currency debasement, a worrisome by-product of quantitative easing,” he explains.

Stoltzfus traces the impact that SPDR Gold Shares ETF (GLD) has had on the price of gold. Going back 16 years, to April 1997, gold was trading around $350 an ounce. For the next seven-plus years, gold ranged between $300 and $400, winding up the period with a gain of less than 28%.

“Since the GLD began trading on 11/18/04, gold spot prices have soared more than 325%, through Friday’s close,” Stoltzfus points out. GLD buys and holds gold bullion, so its offers investors a practical way to own sizable amounts of gold without having to rent space in a warehouse. GLD now has $57 billion in assets while its competitor iShares Gold Trust (IAU) holds another $10 billion of gold bullion.

The increased liquidity provided by these gold bullion ETFs may have played a role in the metal’s historic rally this century as well as in the recent selloff—and that liquidity could help spark another upward move.  As Stoltzfus concludes, “We think the heavy metal might play at least one or two encores for its adoring fans.”

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