The gold bulls kicked-off more than a decade ago and the price of the “king of metals” has been rising since then. But for how long will gold’s price keep rising?
A plethora of investment experts are telling us that “gold is not in a bubble” and that the rise of gold’s price is due to economic factors for instance, the slowly devaluing fiat currencies and the current global economic crisis.
Renowned economists (including Peter Schiff and Nobel Prize winner, Paul Krugman) are predicting hyperinflation and 1930’s depression scenarios across the Western World. This gives reasons to invest in precious metals, as a hedge against inflation.
But not everyone is certain about gold’s continuous rise. Enthusiastic individual stackers and determined professional investors might be in for a big surprise, if gold’s price starts rapidly decreasing.
According to precious metal investments advisor – Prime Values, gold’s price might take a dip as soon as 2013-2014.
Gold price crash is a likely scenario, behind which there are multiple forces acting in synergy. Nor mainstream media, nor experts interested in precious metal sales will tell you about the negative forces that could pull the prices down. Their interest is to “feed” the potential buyers with the idea that gold will uninterruptedly keep rising.
But gold isn’t immune to value-loss either, it had crashed before (in the early 1980’s, for example), it’s enough to check the historic evolution of gold’s price.
Even by looking at the simplest charts – for instance, the ones provided by Kitco, one can observe the “humps” made by gold during 2011 and 2012. Take a look at the long-term charts for the 2000’s and you’ll notice that this metal has reached a point where it looks like breaking and heading for a “dip”.
Frequent horizontal oscillations and strong corrections after bull runs have been characteristic to this 2011-2012 period.
The rise since the early 2000’s has been continuous for over a decade and only smaller oscillations occurred. If there’s going to be a gold price crash, then this period might as well be the silence before the storm!
Here are 8 factors, possible scenarios that could bring us cheaper gold in 2013-2014. It’s very likely that we will see a gold crash as soon as 2013, according to PrimeValues.org.
1. Gold seems to have lost momentum
By observing the charts, you’ll quickly see that gold doesn’t have the momentum it had during the 2009–2011 period. There were frequent dips, sharp corrections after abrupt bull-runs in 2011 and 2012 as well.
All these “dips” occurred despite various negative US economy-related reports, despite many countries ditching the US dollar in bilateral trade, despite China’s massive purchases of gold and, most importantly – despite the launch of “QE infinity” and the re-election of Barack Obama.
Gold was supposed to “get a kick” and turn more bullish on the long-term. Instead, the strong corrections almost completely demolished gold’s energy to rise.
The shiny metal reached above 1,880 $ per ounce in early September 2011, but rarely got above 1,700 $ since then and, it seems to have difficulties holding this limit.
It has often been trading sideways in mid 2012 and towards the end of the year as well. Gold prices in December (dropped below 1,680 $) were much lower than the ones predicted by analysts for the end of 2012 (most experts were expecting prices to top 2,000 $).
2. Gold couldn’t reach the predicted 2,000 $ level in 2012
A multitude of analysts from banks and other financial institutions have been predicting gold prices of 2,000 $ per ounce, some even went as far as predicting 2,400 $ (Citigroup). Instead, the correction was so strong that even after “QE infinity” and Obama’s re-election, momentum dissipated rapidly and gold’s price fell below 1,700 $.
The mere fact that gold keeps disappointing, fails to reach predicted levels repeatedly is proof of weakened investor sentiment.
3. In a deflationary scenario, gold’s price could decrease further
The leading precious metal could take a temporary “dip” in a deflationary scenario – which is characterized by a general decrease of the price levels of products and services.
Various experts have been predicting a “deflationary spiral” in the United States. Most probably the hyperinflation will be preceded by a deflation.
Logically, gold’s price should “take a dive” first during deflation, then as hyperinflation unravels, a strong momentum will propel it upwards. In order to obtain that momentum, gold will have to go much lower than where it is currently.
4. A stronger US dollar on behalf of the weakening euro
The US dollar will gain strength as the euro crisis intensifies.
This will naturally bring precious metal prices down.
Precious metal sellers won’t tell us that this will happen, as it’s not in their interest – but as soon as gold will start losing value, many will sell their holdings, others will certainly lose their appetite to buy more.
This panic could crash gold’s price.
It’s logical that the more the euro weakens, the more investors and ordinary people will rush into buying US dollars. This will drive the price of the US dollar up. At least temporarily, this fiat currency will gain strength.
Forex speculators will love to sell euros for dollars when they can foresee the fall of the European currency. It will be profitable to them and they will unintentionally drive the US dollar’s price up.
Watch the news in 2013-2014 and observe what happens with the euro. The weak euro will mean stronger US dollars, as the latter will gain on behalf of its main rival’s demise.
The eurozone will suffer in the coming years – it is a certainty. If you’re up-to-date with the unfolding events in Europe, then you will have to correlate them with the ones in the USA. It’s logical that the US currency will gain from a weaker euro.
5. Some renowned experts are already predicting lower gold prices for 2013
Economist and investor, Marc Faber (also known as “Dr. Doom”) has stated in a CNBC interview in December 2012 that gold’s price could even go below 1,500 $ per ounce in 2013. He is expecting weaker gold, as we’re still in a correction period. He believes that the correction will continue and we’ll see lower gold prices in 2013. Remarkably, Faber seemed more positive about the US dollar than gold.
Goldman Sachs has recently reduced the predictions for gold’s 2013 peak price to 1,800 $. If this will be the highest price for gold in 2013, one should expect much lower lows.
6. Downwards manipulation of gold’s price
Jim Sinclair (also known as “Mr.Gold”) believes that Goldman Sachs is manipulating gold’s price. He believes that they’re engaging into massive sales of gold in order to bring the prices down and then buy up at lower prices.
Goldman Sachs is just one of many organizations that are speculating on precious metal price differences.
Massive sales will induce fear in other holders of gold and they will immediately start selling, driving the prices even lower. When they’re “low enough”, the speculators will start buying again and the prices will rise.
7. Automatic stop-losses ending positions on bearish trends
Whenever gold’s price goes “too low” to some investors, their positions will be closed automatically due to the levels of their stop-losses. A massive sale of gold by Goldman Sachs or any other major holder will activate the stop-loss mechanisms of the market – dragging gold’s price even lower.
This is an automated domino-effect. Those who don’t want to lose much will have their positions automatically closed by previously-set stop-losses. One-by-one, these stop-losses will “detonate” if the price lows reach the respective “maximum loss” points. Again, the result will be evident: cheaper gold.
Typical to this scenario is a rapid and abrupt price reduction.
8. Weaker confidence in gold as a hedge against inflation, psychological factors
The markets are strongly influenced by psychological factors. Perhaps more than by any other factor.
Confidence in gold has decreased overall, therefore the “humps“ on the charts in 2011 and 2012. The more dips we will see for rational reasons (speculative mass-sales), the more the downtrend will be intensified by irrational reasons (fear, panic).
A temporarily stronger US dollar will create the illusion that the US economy is improving. Believing this, less will invest in gold, as less will believe in it. Gold is good as long as people believe in it.
Among all these factors, perhaps the euro’s weakening will be the strongest one pushing the dollar higher.
The dollar’s strength-gain will be short-lived and eventually the American fiat currency will crash as well.
Before the dollar crash will happen, precious metal prices will get cheaper. This will stimulate buyers to invest in them again, giving momentum to the metals and starting another bullish trend.
Please check gold’s historic chart and at platinum’s 2008 crash and you will see that a crash is not impossible. In fact, it’s a natural process. This should not create panic in you. Instead, you should prepare for it and use it to your advantage. The best opportunity to buy any precious metal is when it has a low price.
The gold crash should stimulate us to buy up precious metals when they’re cheap, because fiat currencies are prone to devaluation on the long-term and the global economy crisis will only worsen.
Gold Report Sign Up Below