Gold has lost some of its shine in the past two weeks and consumers are very happy including me. After a long time, It has given the golden opportunity (Remember this may not be still the right time and right price though) to buy the yellow metal. I did not miss the opportunity and I gifted a chain to my wife.
So let me share with you a reader’s contribution who preferred to remain anonymous.
Let’s discuss about the falling gold prices and what it signals to the country’s failing economy.
Fall In Gold Prices
Gold had its peak price of $1900 in August 2011 and has tumbled almost 25 to 30% in the recent times. This is the first considerable drop in its prices since 2001. The reasons which contributed to this tumble are:
- Inflation in the country is stable and is not expected to rise heavily.
- Federal Reserve is not in favor of any stimulus package to boost the sales growth in the USA.
- Cyprus is expected to sell its gold reserves to pay back its debt.
- The US equity markets are showing signs of improvement.
These 4 reasons sound so good and have brought down the gold prices by almost 20%.
The X Factor eases down
Investors had no hope in the revival of US economy and considered gold as a safe haven for investments. Such investments help them to shield away from the low yielding equity markets. The economic recession in the USA for the past 6 years and melting down EU crisis have trebled the worries of global investors.
There is a considerable hope in the US equity market. The inflow of money is good and people do not think it is time to buy their protector shield, which is “GOLD”. Though the US market is rallying heavily, the economy is in a better shape to pull out from the great recession. When Dow has started to climb up the ladder, people assume to miss the action when they are not a part of it. This gives them a chance to dump the investments in gold.
The central bank is even thinking to increase the interest rates which will push up the prices of commodities. The interest rates are almost next to zero because of which people prefer to invest in gold which will give them better returns. If the banks are in a position to yield better return rates, the attraction on gold is expected to fade away in the longer run.
So, What is your action plan?
Investment bankers and experts have repeatedly cautioned the investors to stay away from gold. The ideal investment portion will be 15% and not more than that. As of now, gold is expected to stay in these levels or might even oscillate by around 10%. This kind of investment shall reap you the benefits in a very longer run and not immediately. If you think you have a dire requirement of gold owing to the marriage of your daughter or sister, this is the best time to plough in your money.