In times of high inflation and market volatility, gold has been referred to as a safe haven. Since the 2008 financial crash, many investors have been seen to venture into the gold market. Unfortunately, a decade later, most of the precious metal’s shine is lost.
Since November 2018, gold has faced a huge decline with its prices dropping by almost 5 percent. Analysists say that the prices are expected to pick up by the end of 2019. It means that a 24-carat may gain about 8-9 percent by the end of the year. As the prices of the precious metal continue to fall, it might be time to invest in it. In fact, major jewelry retailers in Dubai, China, and India have reported high customer foot traffic.
Why the Prices Fluctuated
The performance of gold is strongly determined by supply and demand. In an economic boom, most investors opt for risky yet higher return stocks. Gold is seen as safer when there is volatility in the market because it has steady returns.
The currency markets drive gold prices. Although it is traded globally, extreme downside shocks driven by geopolitical risks could insulate gold. This is whereby the risk of one country’s foreign policy upsets social policy in a different country. Looming concerns over the US-Russian relations and talks on Syria over suspected chemical attacks, debt ceiling worries in the US, and uncertainties surrounding Brexit have given rise to a geopolitical worry which has caused many investors not to buy gold.
It is worth noting that accelerated inflation can quickly lure investors into investing in fiat gold. This means that the bond market in such a case experiences mixed implications for the metal.
A combination of demand for stocks and rising bond yields may help in attracting profit-taking in gold. Check the gold price forecast by marketoracle.co.uk. The yellow metal’s prices have so far declined by 4.1 percent across the globe, a fall that has been triggered by profit-booking and seasonality.
What to Expect
Investors who choose to hold on to their gold investment in last year’s dip may benefit from a potential upside of about 13 percent starting mid-2019. Analysts say that the gold market success lies on the future trajectory of hikes in interest rates.
The global economic expansion took center stage at the beginning of 2019 and could be heading to a recession by 2020. The economic uncertainty may propel the yellow metal higher with about 8.5 percent.
In the past, the demand for gold has been seen to rise at the peak of the Indian wedding season and the end of the Chinese New Year.
Despite the price of gold in Dubai dropping since November 2018, it will see a rise starting mid-2019, with prices expected to reach 1,300 dollars an ounce. This means that today’s selling rate of Dh150 per gram could rise to over Dh160 per gram. The tensions on trade wars and the growing interest rates should trigger a rise in gold prices.