Expect the Gold Price to Fluctuate

There is an old adage that says, “expect the unexpected” and this is a very wise bit of advice for a modern investor. For instance, you can expect the gold price to fluctuate up and down, and for yourself to be unable to anticipate when this fluctuation is going to occur. Why should you expect such unexpected behaviors in the gold price?

Well, to answer that we can point to the two most recent weeks in the markets and how some relatively shocking things transpired. In the very beginning of 2012, there was some trouble in Iran that is seemingly going to impact oil prices. There was also the downgrading of major Eurozone economies. There was confirmation that Greece would be likely to default on its debts. There were signs that India’s economy was experiencing serious trouble, and even China had some indications of difficulties.

Naturally, just one of these issues would have influenced the gold price around the world, but so many things at once had a substantial impact. The gold price declined by a measurable amount in as little as two weeks’ time, but it is believed that it will soon regain the losses and climb higher than ever.

Why? Most of the issues that happened during the first weeks of 2012 caused investors to turn to “safe havens”. Historically it is gold or silver that works as the best or most reliable safe haven, but for some reason a lot of investors wanted paper assets and chose the weak American dollar as their preferred option. This was reflected in the gold price and caused a bit of a decline.

Remember that any time the American dollar is stable, it causes the price of safe haven assets like gold and silver to drop because people are liquidating their holdings. So, instead of a rush to further gold investments at the many different negative headlines, there was a rush to paper investments instead. This is not something that will last long, simply because the American economy is not yet stable enough to validate the faith that investors showed over the past few weeks. Instead, it is far more likely that there will be a “correction” in the markets as people once again turn to gold and silver to secure their wealth through this turbulent time.

So, you can expect the usual “roller coaster” to continue, but it is always going to end at a higher price or value where gold assets are concerned.

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