Why is the Gold Price Falling and in What Direction is it Going Next


Physical gold is appreciated much for its beauty. But gold as an asset class has taken a beating. Its price went through a windfall this July. With the Fed raising interest rates, the gold is losing its shine.

Gold as a form of investment doesn’t give any returns or dividend income. But it costs money to store it.

Those who had invested in the precious metal are now biting their nails as it has lost lot of its value since 2011.

Some are of the opinion that it could further decline.

Various factors have led to its downturn.

A strong dollar has led to the woes of the gold. The dollar has grown stronger boosted by the revival in the American economy and the hope of an interest rate hike late this year. Gold being priced in dollar, when the dollar strengthens, its value goes down accordingly. Bad news for gold and its supporters.

When interest rates rise, the opportunity cost of holding zero-yield assets rises. That implies money being needlessly tied up in investments which could have otherwise been used in treasury bills or elsewhere.

The sloth in Chinese economy, the biggest consumer of commodities has caused the gold to fall considerably. It was expected to raise its gold stocks to levels held by Western banks. But its reserves haven’t swelled as expected, they recently revealed. The 57% gain has not done any good.

Other factors affecting its price are several happenings in the international market. The Greek default, the patchwork solution worked out has eased the fear that the state will leave the Euro zone. The nuclear deal sign with Iran reduces the likelihood of a war which enhances gold’s demand.

Since peaking by $1900 an ounce in September 2011, gold has been steadily losing its value. The selloff in Shanghai and New York, of 57 tonnes of gold in overnight trading led to its spot price reduction by more than 4%.

Gold passed an important barrier of $1100 an ounce on that July day. This event caused many to sell off their holding on which they had placed a stop-loss order.

Speculations are rife that it may go even below $1000.

As far as gold goes, the market is pessimistic. The Chinese economy shows no sign of any fast recovery. Once the interest rate is hiked, investors will move to more lucrative options that bear interest.

This turn of events has hit the mining industry hard. Many are struggling to stay afloat. Chances are that if they close down, the reduction in supply could support the already low prices in the long term. Else, gold could be the option for pessimists.

The Impact Of Inflation And Deflation On The Case For Gold

Since 2007, the global economy has gone through a period of significant financial and fiscal instability. But in spite of this global volatility, gold has experienced an outstanding performance since its price has raised more than doubling. Therefore, such outstanding inflation in the price of gold market has encouraged many reviews of gold properties to focus on the investment of gold.

Determinants of Gold Price

If you judge the price of gold for the long term, it will be clear to you that gold has successfully held its value in the real term. But considering from the short-run factors, its long period of equilibrium can be moved away for the extended period. There are several factors that act as the determinants of gold price like financial turmoil, political stress, inflation, real interest rates, the rate of the US dollar exchange and central bank’s activities and so on. Along with this, the production of this precious metal and its rarity also play a vital role in determining the rise or fall of gold price.

Modeling of Gold Price

In order to investigate the impact of inflation as well as deflation on the gold price, you need to move on the equation explaining the gold price movements during the period of 1976 to 2010. During this time, it was noticed that all the above mentioned determinants had noteworthy short-run influences on the price of gold that resulted to fade away relatively slower pace. This equation has also highlighted on the fact that although the current gold price is comparatively much higher, going back to the equilibrium for adjustment could occur through an increase in the usual price level of gold, before a sudden fall in the ostensible value of gold.

In the course of modeling the gold price, the Global Model by Oxford Economics along with the estimated equation have been used where you will come to know about the relative performance of gold in comparison with the other assets with the time period of 2011 to 2015 based on a number of different economic scenarios. Here it has been noticed that in the baseline scenario while other properties smash gold, in the high inflation scenario gold performs comparatively stronger than the other assets. Likewise, in the deflation scenario it also performs comparatively well deriving from the wave of evasion in the peripheral of eurozone countries. The main reason for this performance during the deflation is the prickly rise during the financial tension.

Gold in the Efficient Investment Portfolio

In the scenario of efficient gold investment portfolio, the study on gold price goes on using several optimism techniques and various implicit long-run profits on gold, bonds, equities, properties and cash. Since gold has no correlation with other fiscal assets, gold plays the major role in stabilizing the valuation of portfolio even through the conventional hypothesis of a diffident annual return is performed.


Based on the financial assumptions, the price of gold can be implied on higher allocations. Therefore, a more inflationary background is ideal for raising the optimal shares of gold and its lower inflation scenario or deflation invites the more risk-averse investors for investing in gold. Thanks to its minor correlations with other assets.

Gold IRA Retirement Planning – Safeguarding Your Financial Interests For The Lifetime

Retirement planning is a crucial aspect of overall financial planning, and should be kept in mind from the very beginning of the career. Most of the people take it for granted, and later on realize it is too late to start or that they don’t have generous savings to enjoy their retirement as they would have otherwise wanted. The retirement planning is not only about savings, but also investing and having a diversified portfolio so that the returns over the investment over a long period of time are high.

gold retirement picture
The diversified investment portfolio should have the mix of high risk investment as well as stabilizer investment. Here is where Gold IRA investment comes in. With the help of a Gold IRA Rollover advisor one can be sure that they would be able to add some solid strength to their investment. Gold is known to not fluctuate as much as other investment tools in terms of volatility, and has historically proven track record of being one of the most trusted asset class, whether you count in terms of value or returns.
Gold IRA’s helps in ensuring that the owner has sufficient funds accumulated with little investment over a period of time. It is not actually a resource for wealth creation, but actually a form of investment that would safeguard your financial investments from market volatility, especially during recessions. There are many firms providing Gold-IRA retirement planning, and you would have to do a bit of research before you actually open an account with any of the top rated gold Ira firms. Finding the right Gold IRA custodian and Gold dealer is the key to opening gold IRA retirement planning account.

Gold Trading For The Average Investor

It is necessary for gold traders to understand how to invest in the most effective manner. Diversity is crucial and will assist in portfolio balancing. The biggest issue that arises among many traders is how to start. With the increased popularity in gold trading there is wide range of options available making it an overwhelming task to choose the right option to select. Below are some basic gold trading tips you can follow in order to succeed.

Before you buy, make sure you are aware on how the trades are priced. Like stock trading or currency trading, for gold you should know the price of metals which can fluctuate in just a single day. Therefore, before you do any trading you need to check market prices. You should also be ready to pay higher percentages beyond melt values for any of the pieces that may be fractional.

Consider the right trading platform online

With the rapid development in internet technology, you can see all the different platforms for trading online. There are good sites that you can trade gold with and we will recommend them on this site. In order to get the best website you need to check how reputable they are on the BBB or look up reviews to avoid falling victim to many unscrupulous companies who are out there to con traders.

Again, it is also important to check at customers reviews on the sites to get some insights on how good the sites are. Every trading platform must be licensed to carry out gold trading. A licensed trader is honest, thus allowing you to buy at the right price. Trading with a licensed company is also important because for any problem that might arise, you will deal with someone who is recognized in making it easy for such pertinent issues to be resolved easily.