Many of you have noticed that the price of gold bullion has fallen again, now reaching about $ 1,600 an ounce, from a high of over $ 1,900 per ounce of gold. The fall accelerated last week in response to the concern of the debt in the euro area. You might think that the crisis in the euro area would be good for gold, since the devaluation of a currency should increase the demand for gold as a store of value and can not be “defiled” by governments and central banks.
However, it seems that when markets fall, investors need more liquidity, which leads them to sell their gold reserves, which are very liquid and thus easier to sell.
The ‘attraction of investors towards gold remains unchanged, which is why you think that the fall in the price of the yellow metal will be temporary, so the gold could be a good buying opportunity for those who want to invest, although of course price could fall further.
The decline in the price of gold has also led to a drop in shares of gold mining companies. The problem is that gold, and is seen as a safe haven, and is influenced by market sentiment. When the markets become more risk-averse, the price of gold often rises, but this does not necessarily translate into an increase of gold extracted. Undoubtedly, the holders of funds like BlackRock Gold & General is disappointed by the lack of a concrete return this year.
The fundamentals for gold have not changed, since there are still negative real interest rates around the world, combined with the debt crisis in the West. However, gold remains volatile an asset, the shares of companies that mine gold are even more, so good advice is to not invest more than 5 or 10% of their portfolio in this asset.