In the wake of the financial crisis in 2008, precious metal prices, gold in particular, rose sharply, leading to a huge increase in investment. While the market has settled down to some degree since, falling in 2013, there are signs that another significant increase in the value of gold is on the cards for the short and medium term at least.
Gold Price Forecast
BMO Capital Markets, an investment banking subsidiary of the Canadian Bank of Montreal, has revised its forecast for gold’s price upwards by 4%, proving its resilience against a strong U.S. dollar and helping gold’s value rise globally. While this is no guarantee for long term investments, it does suggest that gold is currently in a “Sweet spot” for investors.
Demand For Physical Gold
One of the main reason’s for gold’s projected value increase is the demand for physical investment, the purchasing of physical gold rather then buying gold that is stored by the dealer. This is something of a reversal in recent years, with physical gold investment falling since gold’s high value mark post 2008.
Global Trade Tension’s Effects On Gold’s Value
Retail buying, the purchase of physical gold, is likely to be amplified by global trade tensions, and specific inflationary policies. When combined with the performance of gold after 2008, and the largest financial crisis since the 1929 Wall Street crash, it seems that gold, in whichever form it is invested in, is one of the most resilient investment commodities of all.
Cyclical Commodity Prices
Despite gold’s remarkable performance on the global market over the last decade, like all commodities, it is subject to the natural cyclical forces of the market. This is important to take into account before investing in any material as guarantees cannot be given for even the most stable of commodities. But while some panicked when gold’s price fell sharply in 2013, this was always likely to be a short-term dip after the steep rise of the previous five years. It seems that after stabilising since, gold is about to become one of the most sought after investments again.
Investing Sweet Spot
The story of gold rising in price steeply and its subsequent fall is hardly new, as explained previously, the cyclical nature of any commodity is subject to the capricious nature of the markets. This does, however, produce a sweet spot, whereby the price of any commodity, particularly one with a history of steep rises in value such as gold, can rise just as steeply and provide a huge investment opportunity. What’s more, as gold is among the most stable commodities throughout human history, going back many thousands of years, it has always been largely protected from having the bottom falling out of the market that plagues some commodities. In short, there will always be a high demand in gold in the long term, even when prices are falling in the short. This reliability is a major part of gold’s lure for investors.
All that being said, gold’s price is not forecast to increase that steeply. Many headlines are doing the rounds at the moment claiming gold is about to sky rocket in price. This type of hyperbole should always be met with a high degree of scepticism. In fact, so should steep rises in general because they are not sustainable. Gold is currently projected to rise in price by about 4%, to approximately $1,327 per ounce. This is a significant rise and one that should breed confidence in the market over the longer term. The sweet spot looks set to make gold one of the most attractive investments once again.