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Despite the recent volatility, Gold’s prognosis is brighter than ever.

  • 18 August, 2021
  • 1:40 pm EEST

Despite the recent volatility, Gold’s prognosis is brighter than ever.

The future could be just as good as gold.

Many investors have been drawn in by the recent price movement of the precious metal.

Following two flash crashes, could the gold plunge be a sign of market optimism, or might it be a portent of doom?

Let’s take a closer look at this:

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What has happened to gold recently?

Both gold and silver appear to be on a downward trend.

The yellow metal just witnessed a flash crash, and there appears to be the potential for a further decline as it approaches its key level while still fighting headwinds.

Intraday charts, on the other hand, show high volume, which may indicate that smart money is accumulating, possibly signaling gold’s low.

 

What factors influence the price of gold?

There are numerous elements that influence the price of gold.

We know that the precious metal frequently goes in the opposite direction of the US dollar, and that it has natural demand in many businesses and central bank reserves, but what are its common catalysts?

Here are three factors to keep an eye on as they relate to the price of yellow metal:

  • Inflationary pressures:¬†Inflation is looming, and it slowly erodes the value of money and other fixed-income types of investment. Moreover, gold might rally because printing money will eventually take its toll.
  • Economic strength:¬†historically, when economic numbers show strength, the tendency is for gold to experience a drop.
  • Real interest rates:¬†arguably the most important explanatory variable in terms of the price of gold (or the gold-dollar exchange ratio if you prefer).

 

What does this mean, and where should we proceed from here?

Some analysts estimate gold prices based on supply-demand fundamentals, while others focus on macroeconomic considerations.

A key question for gold prices right now is how a stimulus-fueled, post-pandemic globe will react as it learns to live with the COVID-19 virus and slowly begins its recovery, all while being highly impacted by various supply-chain bottlenecks and the likelihood of new versions developing.

The truth is that economies can be a complete headache to forecast, but people’s reactions to economic changes are a completely different ballgame.

This brings us to the most crucial question when dealing with gold:

 

Should you be concerned?

Any investment is, by definition, a wager on something, and investing in gold is, in essence, a bet on fear.

Despite the recent downturn, the yellow metal continues to attract persistent ongoing demand, lending validity to the idea of smart money going long on human fear and calling the FED out on its “transitory inflation” statement.

On the other hand, the stock market is the best indicator of the general public’s mood, and investors continue to pile in.

In fact, the summer of 2020 saw a rare sight as both equities and gold climbed simultaneously, so the trick here may just be understanding how gold is performing relative to how the stock market and the dollar are moving.

Reliable Trading since 2012