Watching the price of gold over the last few weeks has been like watching a rollercoaster. It’s below $1800 an ounce one day, then above $1900 an ounce a few days later. Wait another week, and its back below $1800. Now people are predicting that the price gold may drop 33% this year, while other still claim that gold will be over $2000 by Christmas.
Why did you invest in gold?
Before you panic, think about why you are investing in gold. For many people, gold is a bet against fiat money (the stuff that governments print out of thin air). They purchase gold because they believe it will hold its value – and the Dollar, Euro, or other currencies won’t hold their value.
The reason most gold investors are concerned about fiat money holding its value is that most governments are running at a deficit and have a level of debt that everyone can see is not manageable. Over the centuries, this has frequently been solved by governments defaulting on their debts or inflating their currency (often to the point of hyperinflation).
Why does the price of gold change?
If you’ve invested in gold because of these currency concerns, what has happened over the last few days that would make you believe the problem no longer exists? Have governments around the world suddenly become fiscally responsible and balanced their budgets?
Another reason that the price of gold could drop would be the traditional supply and demand. Has a huge new gold mine been found? Is gold no longer needed in electronics? Have people stopped purchasing gold jewelry?
If you look at the fundamental reasons behind the price of gold, you’ll see that nothing has changed. The reasons you bought gold last year or five years ago are still here today.
What has caused the recent swings in the price of gold?
So, if the fundamentals haven’t changed, what’s causing the drastic swings in the price of gold? Speculation.
Gold has made the news lately, so more people have been rushing to buy some. Other investors have been sitting on large profits and fear that maybe the people claiming that “gold is in a bubble” are correct.
Throw in governments and huge investment firms that could easily be manipulating the price of gold (thanks to the leverage available through derivatives, and huge amounts of capital that can be moved into the gold market in the blink of an eye), and you can see why there are huge daily swings in gold.
Should you sell your gold or hold onto it?
Therefore, the important thing to consider when wondering about the value of gold isn’t what the change will be today. Rather, think about the reasons gold has value, and if those fundamentals have changed. Then base your gold investment decisions on sound principles, and not short-term fear and panic.
Artikel : Gold Investing Strategies
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