This might be the time to think about gold - June 12, 2016

This might be the time to think about gold

In the last 4-5 years the price bubble, that has started to grow on the gold market after 2008, ended. Luckily, not with a burst but with a slow and long correction. As a sign, the news about gold are started to lessen, followed by the correction, but at the beginning of 2016 an important turnaround came: gold started to rise from its $1050 low. The rise was significant, topping at 25%, with a $1300 high. Behind all this might be two reasons.

The first is that USD weakened and that’s always good for gold’s price. The second reason is that many investors started to think about gold as a safe haven, but not in the classical way. As the biggest federal banks around the world started to use zero or negative interest rates, normal savings accounts lost their capability to grant returns. Therefore, nowadays some people choose to keep their money in cash, or if they want to get profit, they have to take at least some risk with an investment. One of the most famous investments – among other commodities – is gold.

As more and more investors realized this, the market started to get overheated. We can see this at how the futurest markets hit its record high in years, and after that how all this popularity brought a minor correction to the prices.

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Gold (XAUUSD) weekly price chart
After all this, we are expecting gold to lose a bit of its value in the near future, and from the $1250-1280 price to go down to $1150-1200. Gold usually has a weaker period at spring and summer, so this historical fact makes the small fall even more probable.

But on the long term this may change. As autumn and the second half of the year comes, there’s a good chance that the price will rise again. If buyers overtake the number of sellers in the future as we expect it, there’s even a chance for gold to go above $1300. If we think about the classic investment credo: buy low, sell high, that might be a good time to start thinking about investing in gold. But as always, proper diversification is an absolute must if we are investing.

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.