Why has Gold Fallen from Grace?

Anyone who has been in touch with the investment market is in one way or another aware that the prices of precious metals is below expectations and off lately it dipped below the 1,200 USD mark after a good 6 % jump early on in the year leaving speculators bewildered on which way to go. If we look at 2015, gold lost by about 12 % and half way through 2016 gold still does not seem to want to recover and the pessimism surrounding the shiny yellow metal is only making things worse.

It can actually be said that for the first time gold has suffered just as much as other commodities instead of it being regarded as a safe haven as it usually is. Instead, that position has been taken over by the attraction of the capital markets which governments are making attractive to stimulate their respective economies. Added with the fact that the Asian Gold exchange has come at an unlikely time, due to which indexes are not reflecting what they are supposed to reflect, the lack of trust by some quarters and the exodus of gold into the Asian market has obscured the performance of the shinny yellow metal. The price projections for gold does not look good indeed with Citi Corp estimating the price would fall to below $1,000 with the only positive projection stemming from HSBC at $ 1,205, the rest including ABN Amro, Agricole, Deutsche Bank, Societe Generale and BMO are all not expecting gold to pass $ 1,050.

Although this may sound like bad news to most gold buyers have been waiting to unload, the truth is that it is actually god news and it’s time to buy the precious metal again because it allows those in possession of physical bullion to lower the average cost of each ounce that they are holding on to. If investors are able to bring the average cost per ounce of their holdings to below or close to $1,100, unloading at $ 1,200 would not be difficult as it will be able to provide a minimum return of 8 % which those who have holdings valued at $ 1,200 per ounce would have to wait until prices are at $1,300 to earn the same returns.

Thus, for those who acquired their bullion for anything above $ 1,200, falling gold prices could be seen as good news as they would be able to reduce their costs significantly and would not have to wait till the prices of gold to soar to make a tidy profit. Whatever it is, a gold bull run is on the horizon and it is not a question of if any more as it is a question of when.

The Feds would not be able to continue the current rate hikes as it would have negative effects on the long run and China’s slow growth is seemingly coming to an end as the Chinese government attempts to prop itself up to stand in for the USD and by the looks of it, they might just manage to do it with all the support it is getting from regional counterparts.