Correction Creates Interesting Gold Market Posted by James Randolph on May 11, 2012
The past few months in the gold market have been anything but spectacular, but with the current correction in full swing we are seeing a market that promises action in the future. The sideways market of the past three months has been a drag on the gold market that has caused many investors to pursue other strategies. Money is made in markets as they rise and fall. So a market that has been staying in a typically static condition for an extended period of time is undesirable to most investors.
The current correction, which is in full swing and promises to continue for at least some time is movement that investors can see and count on to an extent. Investors who short gold have made some money and investors are now choosing to get into the precious metal on the dip.
The dip is fairly significant as gold prices fell to four-month lows on Friday, hitting prices not seen since the correction of December 2011. There are many factors influencing the gold market at this point, the least of which is the trouble in Europe and the just released news concerning JP Morgan. Though JP Morgan promises to be a big story in gold markets for some time to come, the bottom line for the moment is a negative influence on the gold price.
Typically, Asian markets are already buying on the dip, though some investors see a possibly protracted correction in gold. One of the major reasons for this is the protracted bull market in gold. An eleven-year bull market is unusual in any asset class, even gold. There are bound to be corrections in every investment, and in a protracted gold market there will be protracted corrections.
The current correction is good sign for gold through the end of this year, though prices may correct significantly to the downside for some time to come. Corrections are necessary for fundamentally sound bull markets. They also represent the optimal time for buying. During the correction of December 2011, central banks around the world bought gold at a volume not seen since Nixon took the United States off the gold standard in 1971. The current gold market promises similar advances.