Gold prices are set to drop as low as $1,800 a troy ounce as investors see potential for economic strength and bullion investors back off.
Our expectation is that it will be weak for the next few months and strength at the end of the year, says Jeff Christian, managing partner of commodities consulting company CPM Group in a recent video. He sees a likely fall to $1,800 over the near future but it is possible that it goes down further to $1,800.
An ounce of bullion would recently fetch $1920 according to bullion dealer Kitco, which would mean a drop to $1800 would be a 6% loss to anyone buying now.
Investors should expect the SPDR Gold Shares Exchange-Traded fund (GLD
Part of the problems is that many investors are optimistic for the economy and that makes gold and other precious metals seem less appealing. Its also true that rising gold prices tend to be highly correlated with heavy investor demand. It also works the other way around. When gold investors stop buying bullion then its normal to see softer gold prices, experts say.
However, long term investors shouldn’t worry about this likely price dip. First, Christian is a seasoned precious metals strategist and he says the dip will likley be temporary, so their’s little to be lost by holding firm with any gold holding you have.
Second, holding at least some gold in your portfolio, along with stocks and bonds tends to reduce overall volatility. Lower volatility is synonymous with lower risk.
Its also true that while there is economic optimism from some investors, often times it is the least expected thing that can upset the financial markets. For instance, few people expected Silicon Valley Bank to fail and kick off a min-banking crisis earlier this year. When the problem spread to other banks, it was already too late to switch into safe-haven products such as precious metals or U.S. Treasuries.
If you’d held some gold you wouldn’t have to worry about timing the market.