December 01, 2018

How the Gold Price Drop is Making People Buy Like Crazy

Gold price has dropped just recently. The market has become bearish. In investment decisions it is when the market is bearish that most investors stock their investment items since it is the time to buy items cheaply. When the market becomes bullish this is the time to dispose of investment items to make a killing of profits.

Therefore, it is natural for investors to rush to buy investment items during such moments. However, it is not a straight decision to be made.

This decision depends on many factors, key amongst them being:

1. Why the bearish market has come about?

2. The nature of the item experiencing bearish market

3. Future projections in the minds of the buyers

Why the Bearish Market Has Come About?

Why has there been a gold price drop? This is highly speculative. However, there are several factors at hand, among them;

Falling prospects of the Chinese economy. China is known to have an overzealous appetite for metals, gold being no exception. In recent years, it has been consistently projected that the double-digit growth of the Chinese economy has reached its peak and it can only start falling. Indeed, statistics in the last three years have testified this as Chinese economy has failed to reach or surpass the miraculous 10% growth rate. With a falling economy so is the declining appetite for metals thus lowering demand for gold in the international market.

Hard economic times in US and some EU countries. Due to hard economic times, some countries have had to stop piling up their gold reserves. Indeed, most European countries have not only stopped piling up gold reserves due to their declining purchasing power, but some have indeed thought of or in the process of offloading these reserves. Both effects have had an impact on global gold prices.

Fiscal and monetary policies of major economies, mainly the US. In recent times the US Federal Reserve system has established monetary policies that have tended to ease demand for gold in the US such as lowering interest rates.

The Nature of The Particular Item Experiencing Bearish Market – GOLD

Gold is not just any other item, not just any other metal. When prices of non-precious metals fall, people don’t rush over in masses to buy them. However, gold is unique and thus when its price is low people would rush to buy it due to the following reasons:

  • It is a store of value
  • It has ornamental value
  • It has sentimental value
Why Are People Buying Like Crazy – Speculation!

Buyers would rush to buy an item whose price is low if, in their minds, they do project a brighter future for the item in terms of profit margins. Gold has been known to fall and rebound resoundingly. Therefore, many investors believe that a fall in gold price is only short-term and thus they are willing to grab this opportunity with both hands and invest a lot of money in buying gold as they speculate they can make huge amount of profit in the very near future.

Posted by: goldinvestmentreview at 06:07 AM | No Comments | Add Comment
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