Ok, so I am lazily browsing around the net, messing around with my new forum and other miscellaneous stuff and all of a sudden I get the gold bright idea to visit BullionVault’s website to check the latest price of gold, and guess what – it’s at $811 per ounce!
I know many people who aren’t already invested in gold are probably thinking to themselves that now might be a good time to rush like mad. However, I would advise some caution as you are in danger of buying a top (lingo for buying a commodity or currency at the peak of the uptrend right before the beginning of a new downtrend).
I believe the spectacular rise in the price of gold largely speculation driven, so the next question you should ask yourself is whether this uptrend has a chance of being sustained by market forces. By market forces I mean supply and demand, not sheer speculation by jittery traders.
“I wouldn’t be surprised if it went through $800,” David Moore, commodity strategist at the Commonwealth Bank of Australia, told Reuters.
“I still think in the longer run it probably won’t sustain those levels but in the near term, I think that’s quite possible. The gold price has been higher than I thought it would be,” he added.
It is in situations such as these that you need to seriously think about what you are trying to accomplish by investing in gold. Are you merely simply trying to protect your wealth from monetary inflation? Are you trying to profit in the short term from gold’s rise in value? If you answered yes to the first question (like me) then the current price of gold doesn’t matter, unless of course you want to buy some more. In that case you can wait until there is a retrace in price and buy the dips. By now it should be clear that the long term trend of gold is UP. If you answered yes to the second question then you clearly are in this as a “trader” which puts you apart from the regular gold investor. For you the problem becomes knowing when to buy the bottoms and when to sell the tops – something easier said than done.
Right now my opinion is that we should calmly await to see just how sustainable this surging uptrend really is. If indeed gold does break the $1000 barrier as some expert have predicted then I will be both happy and a bit worried at the same time.
Let’s just leave it at that for now. I will continue to scour the news sites and I will post any significant updates.