Gold Prices Yearn for Momentum, Will XAU/USD Rally Fizzle or Takeoff?
The four-year-old upswing in gold prices is set to continue. Gold bulls are optimistic that the downward phase will end in the next few months, but they are concerned about the direction of gold in the long run.
Are these indicators of a bull market or is the price that we see now the bottom of the market? For more insight, consider these facts and analysts’ views on this important time.
Investors and speculators alike are always looking for a price signal. If a trade looks to be in trouble, then it’s likely to be at a lower price. These trends are essential for making sound investment decisions, so let’s take a look at gold prices as they head towards a downswing.
As gold prices show signs of selling pressure, they have dipped into the psychological price range of US$750 per ounce and above. In other words, it is possible that there is no ceiling to the price decline and we are likely to see the market regain its footing in the near future.
This market has been experiencing a rise in demand, largely due to increased tensions in the Middle East and the volatility of oil prices. In addition, many have felt the effect of the weak U.S. dollar, which means that global supply and demand fluctuate.
Because demand fluctuates, the price will follow. During times of economic downturns, consumers purchase fewer goods, while consumers are also saving more, so the number of suppliers available to purchase gold will naturally drop.
During times of economic and political turmoil, the ultimate pivot point is still unclear. This creates room for people to anticipate a stronger economic recovery and tighter fiscal policy, which means there could be an uptrend in gold prices in the near future.
People have been accumulating physical gold over the past decade. According to Dr. Seamus McKeown, who is an authority on the subject, the increase in gold purchases has not been sustained. However, he feels that an increase in purchasing has occurred because the trend towards a shift in the global economy is apparent.
During times of political and financial upheaval, he says, the United States government and the markets will support a stronger economic recovery. This in turn will encourage an increase in demand and prices.
In fact, the demand fluctuations can be quite dramatic. Although this isn’t an exact science, it does look as if the U.S. dollar will weaken in the coming months.
The end of the economic recovery will also impact the price of gold. As it becomes clear that the market has an upward trend, then buying will become more attractive.
If the U.S. economic recovery continues as it has done in the recent past, then we can expect a re-emergence of demand. After all, it’s only a matter of time before the financial crisis has been overcome.
After the first few months of the year, the downward trend will end, and we can expect the market to reflect higher prices for gold as a result of the renewed demand. It is important to remember that market forces will always be at work; there is no such thing as a “rule” that will guarantee results.