Gold Price Predictions
Over the past ten years, investors have seen some phenomenal growth in gold futures. There has been an unprecedented amount of growth in these futures. For any person that invested in gold ten years ago they would have seen nearly a 400% return on their investment today. The gold price continued to go up and up, which left many investors feeling that the ride would never stop.
When investors start to feel like the ride will never stop and continue to pour more and more money into that investment it should always raise a flag of concerned. In recent months, that concern has finally started to surface. There has been some weakness shown in the futures of gold, as there was just too much money flowing into gold and eventually the foundation for the gold price became less stable.
Give Gold Some Thought
Even though this slide in price has occurred, there is absolutely no reason why a person should not consider gold. It does merit that the investor be careful and do the proper research in order to understand the fundamentals that are driving the gold price. If it is speculation that is primarily driving the prices up, then it may be a good idea to wait to see what happens. On the other hand, if there is a valid underlying reason for the increase of the gold price, then investors should be ready to jump on board before they miss a valuable opportunity.
There are a lot of people who try to come up with their own gold price prediction, but this is a very arbitrary task. Everyone has their own reasons for pick such price targets. For the everyday investor, this can be something that is very difficult to follow or even understand. What they end up doing is just following someone else’s prediction for the target gold price. This is definitely the wrong way to invest.
A person does not have to have a full understanding every element that affects the gold price, but the more that they understand the better of an investor they will be. The better way to invest is not to make a gold price prediction, but to make a prediction on the direction of the gold price over the next few months and years. In order to do this, an investor needs to understand the fundamentals of reading a gold index chart.
Indicators of Gold Futures
One of the basic ways to predict the direction of the gold price is to look at past news and indicators. Small investors do not have much input in the gold price. Instead, it is the huge investment firms that move the markets. When they put out a buy or sell recommendation, this typically moves the market in that direction and this is not just a standard movement either.
Typically, when a huge investment firm makes a recommendation, it will accelerate the movement of the gold price. When these huge investment firms make a sell recommendation, it usually pushes the gold price at a much faster rate than any buy recommendation because the basic market overreacting to news from the large investment firms.
What an investor can learn from this is approximately how much of an influence the recommendation is based on past gold price charts. No one can ever predict a bottom or even a top. What they can see from examining the chart is where the points of resistance are. As an example if a major investment firm made a sell recommendation at $1,400, the market will typically start selling very rapidly. Once the frightened investors are out of the market, the seasoned investors will come back. They will then buy back up to the resistance level. The resistance level is usually about where the initial recommendation was. Now if the gold price pushes past the resistance level this usually causes the price to accelerate upwards again. It can be very beneficial to understand the price points and resistance levels.
This is not only one way to look at the gold price and use it to determine an investment action. Another less scientific way to understand the price of gold and what direction that price may head is to look at the basic factors of supply and demand. This may not help in calculating where the gold price should be, but it can certainly help in determining if the price of gold should move up over the next few years or decades or whether it should decline.
Changes in Gold Supply
An increase in supply of gold is not something that will happen overnight. If a gold deposit is discovered, one that would be big enough to move the market, then it can take years before any person or company can ever begin extracting that gold. To get an idea of short term supply, a person can just look at the major companies that mine gold and their individual projections for the short term. The publicly traded companies report how much gold they were able to extract each quarter. If there is an increase or decrease in that number when compared to previous quarters, then this means further investigation is needed.
On the flip side of supply is the demand for gold, which will affect the gold price. This demand can come from both consumers and businesses. Technology companies often use a lot of gold for the manufacture of their products while the consumer side represents a smaller portion of the overall demand, but it can have just as big of an effect on the gold price. As the middle class of certain economies grow, the demand for gold price usually grows and this can be a good indicator to look at when determining where to invest.
There are a lot of wise investors out there who recommend that every person should have some portion of their portfolio in gold. It is just a commodity that has always withstood the test of time, but it is also a commodity where supply does not increase rapidly. Understand what moves the gold price can lead to a very solid portfolio.
