With the news that the United States is considering a proposed “cash-for-carry” deal with the British, gold buyers may be getting some short-term support from a market that has been bearish for almost two years. The European debt crisis and slowing global growth have resulted in numerous stock markets taking a huge hit, while gold prices have remained relatively intact. In addition, oil prices have continued their plunge, dropping another $4 per barrel in less than one month. It seems that investors are becoming more bearish on gold as all of these problems loom closer together.
As gold prices continue to soar on the world market, bearish sentiment may become the new standard. That would represent a significant change in gold price forecasts. Where to next for gold?
Even with global financial problems playing a major role in determining the future of the precious metal, there is still a bright spot on the market. Economic growth is expected to rebound in the U.S. this year. That means additional opportunities for gold buyers to procure physical gold. China, too, is seeing a rebound after a tough economic slowdown last year. Those are the key factors that make gold bullish even as traders and investors remain concerned about the market’s future.
But that doesn’t mean investors will rush to buy up gold just because the market is bullish. Gold is no easy ride. On the one hand, prices are likely to increase because of economic improvements. On the other, the federal funds rate will remain low, making gold something of a defensive investment as U.S. rates rise.
Gold’s bull run won’t last forever. Whether investors believe the market will return to normal remains to be seen. There is little doubt, though, that the price of gold has been inflated recently. Demand from China and other emerging markets is expected to boost demand as well. The Federal Reserve is keeping open the option of raising interest rates as unemployment continues to rise in the U.S., but it may not be able to keep its base rate high forever.
That, of course, does not mean gold prices should fall. The gold price should rise as investors shift their money from U.S. Treasuries to gold. If and when the Fed does raise its interest rates, though, the move will likely send gold prices higher. In addition, the recovery of the U.S. economy will increase consumer confidence and lend some slack to the market.
Gold investors should diversify their portfolios by adding other metals to their portfolios. By diversifying, investors can reduce the risk of falling with one asset. In addition, diversification keeps gold prices from fluctuating too much along with the direction of the U.S. economy.
The bottom line is that the bond market is not directly correlated to gold. Gold’s price may temporarily drop as a reaction to a tightening U.S. economy or its impact on China’s economy. But over the long run, investing in gold has great benefits. As the U.S. economy becomes more solid, the bond market will likely strengthen and gold will become an even more attractive investment.
Gold is a competitive commodity in the stock market and there are very few areas where you can buy and hold without entering a fierce competitive environment. Gold’s spot price has been increasing for the past year, as the bull market in stocks continues to expand. Gold’s premium continues to be a key factor in determining whether you should buy or sell a metal. The stronger the U.S. economy gets, the more attractive gold becomes a risk-free long-term investment.
In the last few years, the United States has felt some economic stress. It is uncertain how the global economy will evolve, and many analysts are watching the stock market and bonds to determine the direction. While the stock market is showing signs of improvement, some are concerned that the United States will encounter a recession before the end of this year. A key sign to watch for is the rising gold prices. Historically, when gold prices are driven up, bond prices tend to decline.
Bond yields are primarily driven by two factors – demand and supply. When there is an excess of supply, bond prices go down. But when there is an excess of demand, gold prices soar. With oil and other commodity prices remain at historic lows, investors expect the gold price to continue to go up. If you own gold, you may want to consider selling some of your assets and wait for the market to improve. If you are holding on to assets that pay high returns but do not fit within the traditional risk-adverse categories, such as bonds, you may also want to wait and see what happens.
The bond market is not the only place you can turn to find safe investments. There are also many options available in the financial realm including precious metals. You should have a plan in place for diversification, so that you can manage risk both economically and in terms of your portfolio. As gold prices rise, there may even be an increase in value of the precious m