Is Gold Set to Plunge This Year?

Gold investors have been rather apprehensive ever since some predictions about a fall in gold prices were made by the bears. In fact, a sharp plunge in price to below £625 per ounce was predicted. When specialist dealers like GoldCore spoke of disastrous times ahead for leveraged longs, those with exposure to gold in the portfolio began to seriously doubt their investment acumen. However, there have also been diametrically opposing views expressed by analysts.

Interesting Video by KitCo About Gold Prices Plunging:

Why the Doom and Gloom Prediction?

One of the main reasons behind GoldCore’s dire predictions for gold is Fed Chairman Bernanke’s recent statement. The Chairman underscored the improvement in the U.S. economy and this immediately realigned the markets. It was taken as an indication that the low interest rate environment would no longer be actively supported by the government considering that the need for this intervention is no longer present.

Gold has been enjoying excellent demand and gaining enough support from the market to maintain high prices for long mainly because cash based assets have simply not been worthwhile investments thanks to the low interest yields. If this scenario changes, investors may move into cash assets once more and the demand that is shoring up gold prices now will fall, leading to a fall in prices too. This is the reasoning behind the dire predictions for gold.

Has the Bull Market Ended?

According to Brian Dennehy of Dennehy Weller IFAs, the bull market has not ended yet. He points out that while it is important for investors to exercise more thought before buying the yellow metal, there is nothing to show that the bull market is finished. Ben Yearsley (Hargreaves Lansdown) and Alan Steel (Alan Steel Asset Management) hold that the outlook for this precious metal is still good since the uncertainty in worldwide economies is nowhere near resolution.

Alan Steel explains price aberrations as temporary setbacks that will not impair the successful run that gold is enjoying in today’s markets. In fact, he recommends buying gold if a price dip does occur in the coming weeks. This will allow investors to make the best of the sway in gold prices without giving up the hedging that gold offers to the other assets in their portfolio.

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