commodities

Is the gold rally the real deal or ‘fool’s gold’?

“Whenever in doubt – buy gold” seems to be the mantra of modern financial experts, and the newest financial crisis slowly gripping the markets seems all too eager to put it to the test. But is it really the best course of action to take whatever funds you can salvage from your assets and convert them into gold at these inflated prices? Gold prices have jumped 14% since last December, which is quite a lot, all things considered – even if it does not appear so at a first glance.

Even if selling off volatile assets and converting them into precious metals may have seemed like a good idea when gold prices were relatively low, but right now, gold is one of the few assets that are doing quite well. And that means those who acquired it on time are looking at some serious profits, at the expense of those who are too slow to pick up on the trend. So, is gold the real deal? Perhaps, for those who already have it. But what about the traders who were not so fortunate as to acquire gold while it was relatively cheap? Is there any point of acquiring it now?

As you may know, precious metals pay no dividends and buying assets that do not trap your funds may seem preferable than taking defensive measures of trying to freeze your capital. It all depends on how gold will perform on the market and if there is enough time to sell it at a profit before the market recovers and price of gold starts tumbling down, as investors gather the nerves to start searching for other, more lucrative profit opportunities. Basing business decisions on emotions rather than sound logic can be the biggest mistake in your life. Still, it should be noted that different analysts predict different trends, but most of them agree that current gold prices cannot last.

The have-nots are looking at headlines telling them gold prices are going to plummet, and soon. A few months ago, Kitco predicted that in 2016 gold will drop below $1,000. Others, like Bloomberg and CNBC also agree, to a point. It hardly takes a genius to figure out that what goes up, must come down at some point, but what the experts are struggling to agree on is just when will the drop and how far down will it go. In other words, there is no question regarding gold: it has to plummet at some point, and the ones who will profit the most from it are those who accurately gauge the time as well as the extent of the change in the price of gold.

The Profit Radar Report is betting on $1,100; as mentioned before, Kitco has their sights on $1,000 or less. The thing is, with several bullish RSI divergences, the bounce could come at any point. Right now, anyone with a decent chart can see that trade is well above resistance. It broke through last month and does not seem to show any signs of reversal, at least for the time being. Of course, this is only a matter of time before the inevitable happens, but there may be some profitable opportunities yet.

In the short run, gold is being overbought, but the trend continues. This makes investors believe that gold ETFs are a good idea, especially if they think long-term. They are probably right. Still, the history does have a habit of repeating itself, and what happened last year may happen again. Some investors will recall the events from last November, when gold started picking up before rolling over last month. The downside risk may be less of an issue now than it was a few months ago, but it is still very much present. All in all, the next resistance should start around 1,205.

In the long run, gold seems to be in decline, having lost almost a half of its value in the last four years. In fact, last December saw some pretty low extremes, while the commercial hedgers were being as bullish as they get. All things considered, they are usually right and since this is gold we are talking about, this might just be a good investment, despite what long-term trends might indicate. Some support is expected when gold reaches 1,170. The same goes for 1,145 and there might be some more at 1,115. Still, “buying the dip” is recommendable for the time being.

 

 

 

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1 Comment

  1. January 13, 2017 at 10:49 pm — Reply

    Until I found this I thughot I’d have to spend the day inside.

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