When it comes to investing our savings, we often turn, in good faith, to people who are strangers or to people who have to propose certain paper-based investment formulas. The price of gold last 2016 gave us a decidedly good performance, bringing prices from a low of $1,050 per ounce to a high of $1,375 per ounce in the hottest period of the year. Then the prices fell again, following a decrease in the perception of the crisis and an increase in the stock markets or a renewed appetite for risk.
In recent months, however, the price of gold remains within a price range between $1,140 and $1,250.
But the fundamentals have not changed and are still in favor of gold. The appetites of China and India (the two largest consumers in the world) have not faded even though India has registered a decline after government authorities imposed taxes on gold imports to reduce the trade deficit and especially after the demonetization which hit hard the sales to private individuals. But the Indians who have gold in their DNA, after an initial moment, have started to buy back the precious metal.
The Central Banks themselves, and we are referring in particular not only to those of emerging countries but also to Russia and Kazakhstan not to mention China, continue to buy gold, to be included in their coffers to preserve wealth.
But we in particular in this column are interested in understanding how to market variables influence gold prices. To understand the reasons, it is important to evaluate not only the news of macroeconomic nature but also and above the technical characteristics of these movements which move the price of gold up or down.
The movements defined as technical, are those observable with great attention in the graphs that draw the trend of the quotations. Quotations that not only discount the news but are subject to precise rules. If in the short term, downward pressure remains, in the long term the trend remains positively oriented.
There are several fundamental factors at play in the physical gold markets which at these levels see factors of a different nature opposing each other, but all aimed at favorably influencing the price of gold. These include a modest recovery in the pace of growth of the global economy, overly optimistic fundamental data from the United States, Europe in recession, the rally of stock markets bloated by the ample liquidity, and still a strengthening of the US dollar.
Investing a small part of your capital in Physical Gold and Silver allows you to correctly diversify the allocation of your savings, protecting you from unpleasant surprises, as we often hear on the news.
