The price of gold in the last two years has seen its ups and downs and the price of gold has recently dropped from more than $1800 per ounce to just under $1600 ounce. Despite the price of gold undergoing fluctuations, I think the price of gold has a long way to go down before the market can even think of panicking. To be sure, if gold should collapse, it wouldn’t create any systemic risks or wreak any havoc on the economy like what happened with the housing crash but the price drop would be dramatic none the less.
Gold-The Perfect Commodity
Gold is the perfect commodity. Nobody who buys gold seems to care where it is mined, and there is little to no brand loyalty as to where gold buyers buy their gold. So long as the price of gold is consistent with the spot gold pricing, people will buy from almost anyone. So long as the cost to produce gold is well below the price of buying gold- the market should remain stable. To understand why this stability occurs, we must take into consideration the factors that determined the market to set the price of gold so far above its production costs. What is it about this precious yellow metal that has temporarily given those that produce it the greatest margin in history?
The major contributing factor to the explosion in gold prices has been the world financial crisis of the last few years and the ensuing worldwide central bank policy to fight against financial asset price deflation.
Although taken independently, they were both temporary but when they vanish it could mean an intense drop in the price of gold. It’s been often said that gold takes the escalator up and the elevator down- or in other words much like gambling in Las Vegas slow to earn, quick to lose (anyone who has ever gambled in Las Vegas can attest to this fact). Sites like bullionbay.com, help to take the risk out of buying and selling gold. Save up to 90% compared to spot gold prices, and ride the elevator up to the top.The Retail Demand of Gold
In addition, the once rampant retail demand for gold has already started to waver. It seems abundantly clear that advisers and investors alike are in the early stages of cycling out of fixed income and moving into equity investments. What’s not one hundred percent visible however, but definitely on the move is the same retail cycling out of gold and into equities as well. It’s almost as if investors are doing a reverse diversification. For retail investors the gold trade was based on fear- was the dollar going to collapse, would the economy falter? As well as based upon greed as well. Although there is always a degree of fear present, the masses seem to be desensitized to it, and with the fluctuation in the price of gold, not yielding the record profits that everyone expected, the retail demand for gold is shifting in the other direction.
Advisers are not speculating whole-heartedly that this reversal will happen, but one thing is certain, that markets react well in advance of reality, so the savvy investor should be well insulated for what may or may not happen. The price of gold began its climb in 2006 and other than a brief dip in 2008 had risen steadily higher well into 2011. Clearly, the gold market was well ahead of the activity of the central bank and today, with the central bank easing into full swing, gold is retreating in advance of what may be on the horizon. So what does this mean for the price of gold? As some investors seek to eliminate the percentages of gold in their portfolios, other investors look to add gold to their portfolios. This has been the case for thousands of years.
HOW A $17,537 CASH INVESTMENT BECAME A $4 MILLION PROPERTY GENERATING A YEARLY NET INCOME OF $315,000!
(AND THE STEP-BY-STEP DETAILS OF OTHER OUTRAGEOUSLY PROFITABLE REAL-LIFE PROPERTY DEALS)
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