Gold Market Continues Downward
Posted by James Randolph on May 16, 2012
The gold market continues to ride on political developments out of the Eurozone as well as in Asia, signaling a strong correctional period that will persist. The correction in the US gold market continues at strength, breaking through important barriers with an indication that further action is in the works.
Gold was down again on Tuesday by 0.25 percent, closing at $1,557 per troy ounce. Gold is off 6.44 percent on the month. Gold is at the door of the $1,550 mark, which if breached could bring the precious metal to the $1,533 line.
Most forecasts see gold headed lower in the near term, even with a strong gold bull market still intact. Should gold breach the psychologically important $1,500 level, we could see a market reaction, but it still might not be the end of the current correctional cycle.
A correction of 35 or 40 percent would not be entirely unusual for an asset class that has enjoyed a ten-year long bull run. This is on the rather extreme end of forecasts, but it is nonetheless a possibility. The current correction promises to continue with the possibility of reaching these levels before the fundamentals of the bull market again raise gold higher.
Mitigating factors include economic reports that will be coming out of the United States, which could bring an optimistic sentiment to all markets and thus a temporary reprieve in the gold correction. US Housing Starts and minutes of the April Federal Open Markets Committee Meeting are all strong indicators to watch for brief influence in the gold market.
However, the correction is strong and will continue despite data suggesting adverse economic conditions. By the end of the current cycle, we will see extremely affordable gold prices, which will represent a spectacular buying opportunity for gold.
The best advice from legendary investors and experts alike is nobody should be selling their gold, but timing the bottom of the market may not be the best investment strategy, particularly as nobody can accurately say where that is at this time. Gold bought now at the current will certainly be valued higher in the near-term future, making the current market a buyer’s market despite the correction.