For months now, experts have been predicting a surge in demand for gold. Why hasn’t the price of gold climbed higher yet? Why is the yellow metal holding steady, and what is it waiting for?
One theory is that the grip of inflation has not yet descended on the country. Until the small tide of deflation passes, inflation will not rear its ugly head. Inflation was expected to come sooner, but for now, it seems that its effects have been postponed. In the meantime, deflation is a short-term reality. For prospective gold buyers, this holding pattern represents an opportune buying point in the market. While there’s a tendency to wait to buy until the market starts to climb, the real profit potential occurs before the mad buying frenzy starts.
As the stock market shows signs of recovery, the price of gold is not expected to go higher until something shakes it up. If the stock market suffers a second recessionary wave, which is likely, the yellow metal will jump higher. Because of the anticipated inflation cycle, the stock market is expected to take another hit. Historically, when inflation sets in deeply, the price of gold jumps accordingly.
Other experts believe that a short-term position on the metal is a mistake. The golden bull run is readying for a cycle that will take years to complete, not months. The patient investor will be the winning investor.
An unexpected twist of events occurred when the euro fell to the dollar due to economic volatility in the European zone. The euro’s loss is the dollar’s gain, but when the dollar climbs, gold rarely climbs in tandem.
What will it take for another price jump? It will probably take a small price fall to lure new investors in, and the Chinese central bank is probably waiting for a price drop to purchase more of the metal. A swell in demand in Asia will undoubtedly drive the metal up.
The precious metals market is in a holding pattern and is part of a wait-and-see game. Everything is occurring in slower motion than predicted, mostly because of the small deflationary spiral and growing economic concerns about the value of the euro. The metal market is not immune to the laws of supply and demand. With a supply that’s growing because of consumer disinterest in buying expensive gold jewelry, it will take action on the demand side to really stir up the price.