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Gold Is Down Right Now, But It Will Come Back!

Updated on January 24, 2011
Time To Buy Gold Bullion? I Think The Market Fundamentals Say Yes!
Time To Buy Gold Bullion? I Think The Market Fundamentals Say Yes! | Source

Gold Is Down, But Is The Bull Market Over?

The first month of 2011 is almost over and Gold has been selling off fairly hard. It's down about $100 from its highs around $1,440. As some may remember or may have read, I wrote a hub predicting that Gold would hit $2,000 an oz. and probably in the next 2 or 3 years. That was back in late November and Gold hasn't moved much since then from its price point when I wrote that. And now we have had this nice little sell off at the beginning of the new year. So some might ask me, if I'm starting to get nervous about making a public fool out of myself with my $2,000 prediction. First off I'm definitely not always right about everything.. Nobody ever is! And I may indeed prove to be wrong about my forecast for Gold & Silver that I made back in November. But, to put it real bluntly, no I'm not worried at all about making a fool out of myself due to Gold not reaching my $2,000 prediction. Gold is always a very volatile market. It's a much smaller market than most people realize. Since the price has performed so well over the last decade, there are allot more investors eyeing it for potential profit. This means that there is allot more money flowing in and out of the gold market now and I would expect this to continue. With more money aimed at this relatively small market there will be more and more volatility in price. This is one reason it wouldn't surprise me at all, to see Gold have even more downside ahead, at least for now. It may fall another $100 to $200, or even more. Who knows? I'm not worried about it though and I'll tell you why.

Invest Long Term On The Basis Of Accurate Fundamental Trends

One reason that I'm not concerned my prediction on Gold is in danger of being wrong is that I'm speaking about it in terms of being an investment. My philosophy on investments is that they are a long-term endeavor that requires a high degree of patience. That's why short term, price swings (even big ones) shouldn't have any impact on my view. That isn't to make the practice of investing sound easy. The key with investing in anything is to sit tight and be right. Both are difficult, but the being right part is really tricky. Being right requires that your forecast has to be based on accurate information and assumptions. That brings me to my next point about why I'm not concerned about being wrong in regard to Gold's long term future. As noted before, my bullish view on Gold, is a long term view. I'm expecting higher future prices for Gold based on what I have concluded is likely to happen concerning the economic and fundamental factors that impact the yellow metal. Despite the recent swing to the downside, Gold's fundamental drivers have not changed at all. The fundamental drivers for Gold are actually pretty simple if you research its history. Gold has long held the role of being a currency (used as a medium of exchange). Of course many governments have de-linked their currency's to Gold, but that hasn't changed the fact that gold is still used as a store of wealth, by nations, central banks, and individuals across the world. Ultimately people still look to gold when they lose faith in paper assets. Allot has happened over the last decade and allot is continuing to happen currently, to shake people's faith in paper money and assets. Just look at the daily news. States and municipalities are on the verge of bankruptcy, pensions are bankrupt, Social Security and Medicare are extremely unbalanced, Iraq and Afghanistan don't have any clear end in sight, and neither Republicans or Democrats in government have any strong plan to correct the growing deficits. This means more spending and printing, which means continued loss of confidence and possible collapse of the US Dollar, which will drive gold much, much higher eventually.

The Gold Sell Off Is Likely To Prove A Buying Opportunity

For Investors it's important to pay attention to fundamentals over price. The price is susceptible to all kinds of short sited whims and frenzies. If the fundamental factors are still bullish that is what should determine whether an investor remains bullish. That's why so many who have tried to call the demise of gold's bull market have been so wrong over the last decade. They weren't paying attention to the fact that government is growing unsustainably and the Federal Reserve is printing way too much. Or they didn't understand how these factors influence the price of gold. This is the key though, if you understand the fundamentals of a market, you don't have to be worried about every little sell off or every new analyst report. It's only when the fundamentals change to being bearish that you should start to change your own view and take your full profits. This is why I'm not even slightly worried about gold right now. I know the government is set to stay on their continued unsustainable path. Just check out my last hub on food stamps for a look at how committed the government and corporate allies are to the welfare state. It's not good for the country, but it will be for the price of gold. Not everyone realizes it yet, but that gives those who do know the opportunity to buy on these dips. Make no mistake, the smart money is following Russia's recent gold moves. Their 100 ton per year investment is not a sign of confidence in the quality of paper money these days!

Disclaimer: I am not a financial advisor and this is not a solicitation to buy or sell anything. I have my own money invested in Gold, Silver, and Related Investments, so consider this article somewhat biased. Again, I am not registered with the SEC as An investment advisor, and you should always do your own research before making investment decisions


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    • Mr Tindle profile image

      Mr Tindle 7 years ago


      Yeah if people can learn to stomach the volatility that comes with any investment at times. The key is to stay focused on the fundamental trend driving your investment to be a good one. Great Investing is about taking positions with good fundamentals and sticking to it, even when the market tries to shake you out at times. Easy concept, but hard for many to actually execute.

    • Pente profile image

      Pente 7 years ago from Planet Earth

      Buy it go up. Buy it go up. Whee! This investing stuff is easy.

    • Mr Tindle profile image

      Mr Tindle 7 years ago

      Dave Mathews,

      Good to hear your opinion Dave, but I wouldn't be so sure about that. Your right that it is being inflated. It is in fact being inflated by the borroing by the federal government and the printing that goes along with that at the Federal Reserve. As for the bull market ending though, probably not any time soon, because that depends on a shrinking government and less money being printed. Very doubtful anytime soon!

    • Dave Mathews profile image

      Dave Mathews 7 years ago from NORTH YORK,ONTARIO,CANADA

      The price of Gold is inflated. It is being driven by I don't know what, but one day soon the bottom will fall out of it and it will return to its true value.