what to watch out for when investing in gold
Post on 12-Apr-2017
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What to Watch Out for When Investing in Gold
By www.TradersNewsandReviews.com
www.TraderNewsandReviews.com
There are great times to invest in gold and there are times to avoid the shiny stuff like the plague.
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This thought came to mind after seeing a Market Watch article saying that gold gains as stocks sputter (near record highs).
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Gold futures tipped modestly higher in subdued action Tuesday, with traders taking their cues from an equities pullback after fresh record stock-index highs on Monday.
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Gold has generally maintained its uptrend, but has been tracking stocks in the short term.
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U.S. stock indicators pointed lower Tuesday even with a Goldman Sachs earnings beat and a report showing a 4.8% rise in June U.S. housing starts.
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Flagging appetite in stock tends to coincide with demand for the perceived safety of precious metals.
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Conversely, stocks and other yield-bearing investments can pull demand from gold if sentiment tilts toward riskier markets.
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If the stock market pulls away from its all-time high gold may seem more attractive, especially in a world with so much social, financial and political uncertainty. But be careful.
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Here are our thoughts on what to watch out for when investing in gold.
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The standard argument for gold is that it holds it value when paper currencies falter.
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There is only so much in the world.
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Today in fact they are mining two miles deep in South Africa at the East Rand mine in Boksburg to find new deposits.
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Gold bugs remind us of the days of the German Weimar Republic in the 1920’s when inflation drove the paper Deutschmark so low that it cost a million marks to buy a loaf of bread.
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The time to invest in gold is at the start of a rally.
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The time to get out is before the rally is over.
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In 1973 the USA went off the gold standard and gold went from $20 an ounce to $35 and then to over $800 an ounce by the first days of the 1980s.
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When the bottom dropped out of the gold market the price fell to $300 an ounce and then down to $200 an ounce until 2001 when another rally started.
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That rally peaked in 2011 at $1,900 an ounce and fell below $1,100 an ounce at the end of 2015.
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We are now seeing a recovery into the $1,300 range.
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Goldprice.org has a nice chart of gold prices since the USA went off the gold standard.
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What to Watch Out for When Investing in
Gold
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Aside from its peak in 1980 and again in 2011 gold has its ups and downs.
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Beware of investing heavily when a rally is well underway unless you understand the fundamentals that are driving the rally.
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Runaway inflation and a weakening currency are good reasons to get into gold and when those situations remedy themselves it is time to get out.
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Technical analysis of market sentiment can be a good guide to short term profits and as always fear and greed are the biggest enemies when tracking a volatile market.
For more insights and useful information about
trading, visit
www.TraderNewsandReviews.com.
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