Gold shines again - March 06, 2016

Gold shines again

This year started out quite exciting: while everyone focused on the falling of the stock markets and oil, something interesting happened in the background. Precious metals’ price started to raise after years of falling. This is important news but we still don’t hear a lot about it, and that may be good for the open-eyed investors.

Ever since the peak in the year 2011, investors have overlooked gold. The reason for this was that there was no need for gold as “safe-haven”, since stock markets performed well everyone invested there. There was no inflation either, which was expected by many after federal banks turned on the money taps. Thanks to all this, gold lost almost half of its value compared to its peak at USD1900. After all these years, it’s interesting to see gold raise 15% in months, and there is a good chance there’s some reserve in the rate.

What has changed the rates now?

There are some rather important regions on the gold market, such as India, China and the United States. In these countries, there is an increasing demand for gold lately, and according to some analyses, the growth will go further. In addition, due to the constant weakening of the Yuan, the Chinese demand is expected to grow even more.

Federal banks are also buying gold (that didn’t change in the last years), but for them it is a tool of diversification, since they are trying to balance their currency reserves.

It’s also important to mention that since 2008, the last year was the weakest in the exploitation: there was only a 1% growth and analysts expect further fall backs due to the mine closures and the cost cuts.

Also, more and more federal banks are having negative interest rates. To put it simply, if we keep our money in the bank, we don't get any returns for it, but we have to pay the bank. Because of this, it’s better for people to keep their wealth in cash, or, if they want returns, invest it in alternative ways, like stocks or gold.

It’s also worth mentioning that the price of gold may change with the USD. The rate of the dollar is closely connected to the decisions and communication of the FED, of course. Therefore, if they decide that another rate hike is due, that will probably strengthen the USD. This will probably lead to the fall of gold’s price, since the precious metal is counted in the greenback, and would become more expensive for foreigners to buy it. We believe that the USD will probably not change a lot in the next months.

What’s next?

According to the chart below, the low point of gold is probably at around USD1050, and in the next years a raise is expected. This could even happen in the next weeks, and gold may raise above USD1300. Even if that happens, we expect a bigger correction in the price soon afterwards, and the price may go back somewhere between USD1150 and USD1200 which would be a great chance to start buying gold again.

Altogether, precious metals might be a great surprise in the next 1-2 years.


Disclaimer: Innovative Securities’ Profit Gold can help you to invest easily in gold. This analysis is for general information and is not a recommendation to sell or buy any commodity. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. This is important when considering any investment.