Gold is a precious metal that has been used as a store of value for many years. Investors across the globe use it as a haven when inflation hits world economies. Also, when investors anticipate property prices to crash, they store their wealth in gold. But the recent gold price dipping has raised eyebrows, with experts suggesting that this is the right time for investors to buy gold. Towards the end of 2021, the yellow metal lost more than 4 %, dipping to $1760 per ounce, which is $298 lower than its 2020 highest price of $2058 per ounce.
Gold is thus a hedge against currency devaluation and inflation. Also, the prices of gold have been stable for many years, so investors will always buy it whenever they foresee devaluation of a currency and short sell it when it strengthens.
So what does short selling mean? It means selling an asset whose value is expected to fall. For this reason, the value of gold will always increase as the dollar weakens. Similarly, its value will decline when the dollar strengthens. Read on to see why the recent fall in the price of gold has presented reasons for traders to invest in the yellow metal.
To Safeguard against Covid 19 Pandemic Economic Effects
The micron wave is yet to peak. Therefore, many countries are putting in restrictions to try to control its spread. This is expected to impact many economies of the world. It means that we are likely to experience disturbances in the world economies. The disturbances will lead to the weakening of the dollar. Thus, as the dollar weakens, we expect the price of gold to surge beyond its all-time high. Consequently, investors that will put their money in gold are likely rip big from their investment.
Gold Prices Are Likely To Surge
For the first time, the fall in the price of gold has hit the lowest level since 1982. A few days ago, an ounce of gold was trading at $1800, but it has bounced back to trade at between$1820 and $1835.This is an indication that the dip has come to an end, so the price is likely to rise to about $1900 per ounce in the coming months. Already, the yellow metal has developed support at $1760 per ounce and is unlikely to move below this level. Therefore, any investor who puts their money in the metal is likely to gain as the prices move away from the support level. The price is expected to move upward until it hits the resistance level that is somewhere between $1880 and $1900 per ounce.
Global Inflation
Numerous factors, including global events, influence gold prices. Therefore, the world is experiencing some form of inflation which has made the metal to experience a massive dipping. Thus, experts suggest that this is the right time to invest in the metal. They argue that the only thing that is likely to happen is for the price to go up.
Take Advantage Of The Consolidation Phase
Between 2018 and 2020, gold went into an astonishing advance. However, in 2021, it entered into some consolidation phase. So, experts believe there should be a bull run for some time. As a result, the recent dip in price is a sign that the yellow metal was preparing for a bull run. So, anyone putting their money in the precious metal is likely to gain.
World Events
Last year’s gold crash was occasioned by real low rates in the US, Covid 19 and rising inflation. These factors contributed to the dipping of gold prices and subsequent development of a support level. Also, the expectations are rife that the Federal Reserve is likely to normalize the monetary policy in 2023. This reduced the demand for gold resulting in price dips that were experienced towards the end of 2021. So currently, the yellow metal is going through some price corrections that are likely to last as long as the $1900 resistant level is not attained.
Conclusion
Of course, there are plenty of other reasons why investors should choose to put their money in gold. But the fact that gold prices have been consolidating in the past few months and that the prices have already hit the support level are sure indicators that the prices are likely to go up.
