Gold Investing

In 2014, speculation for gold investment is poised for a wild a ride. Earlier predictions that gold prices would rise or at least remain afloat, have been reduced in the face of political decision making by the U.S. government. While the global demand for gold will continue to be strong, with China leading the way, other emerging economies such as India forecast a reduction in the demand for gold, in spite of exponential increases to the demand in silver tied to industrial production and a growing middle class and rural investor interest in fabricated silver investments.Monex Live Gold Prices

Predictions of a moderate to a significant decline in gold prices in 2014, is prefaced by a downgrading of the bullion market by 15% or maybe more by some lead investment institutions. Risk analysts suggest that such a warning reflects a downside risk for precious metals commodities, with gold as the most risky. If forecasts prove true, the reduction in the gold price could reach $1,057 per troy ounce, lower than investors have seen since 2010.

Sharp drops in the gold price attendant to the better than predicted U.S. economic performance are in part, due to the U.S. Federal Reserve’s tapering strategy to gradually pull back on the $85 billion monthly bond buying program instituted amid easing policies. Gold has been a buoy on a sea of cheap money suggest analysts, yet the forthcoming tapering policies and even currency rate mean that gold will be less in demand by North American investors. As the central bank contracts on its monetary stimulus, gold prices are likely to fall.

Speculation v. Physical Gold Investment
The drop in London intra-day gold price will impact speculation across the markets. Investment in exchange traded funds (ETFs), mining stocks, mutual funds, options and futures are likely to see a reduction in price action in the second quarter of 2014. Aside from securities, physical investment in gold is predicted to continue at a steady pace, yet some analysts suggest no change to fabricated metals is likely to arise if market uncertainties remain at bay during the transition in U.S. monetary policy.

The moderate increase in federal fund interest rates on 10-year US government bonds in first two quarters of 2014 may trigger variance in gold price. If all indicators are correct, the rise in the interest rate coupled with fluctuation in speculation in response to the forthcoming change in the Fed’s position on bonds, could create an initial catalyst for secondary market gold speculation, making ETF contracts in hotter demand than is currently predicted.

Mixed investor confidence in the face of the U.S. government’s forthcoming Congressional debate over the national debt ceiling, and its constraints on the national deficit in January 2014, are also expected to generate a wave of uncertainty if not dealt with in a stealth manner. Add Janet Yellen’s confirmation as the new Chair of the Federal Reserve in the same month, and the reason for contradictions between market analyst and economist opinion becomes apparent.

In any case, gold prices should not affect trading due to the fact that the historical convergence of systemic risk with major political transitions has set the stage for safe-haven investments. The strength in consumer demand for gold worldwide offsets some of this uncertainty, as investors in economies like China are already faced with escalating inflation and risk to speculative investments.

If analysts are correct, investment flows to emerging markets will continue to bolster demand for precious metals demand globally, and this is a good thing for North American traders and investors abroad. U.S. investors should invest in both speculative and physical gold assets, with emphasis on the former in Q1FY14 and Q2FY14.

The Near Future Forecast for Gold Investment
Emerging market demand for gold will continue to boost the price in 2014, say analysts. In fact, the demand for gold and other precious metals in emerging economies and central bank purchases is predicted to continue the next fifteen years as investors seek continued safe-haven from international market fluctuations and political risks.

The increased access to liquidity in middle and lower income countries is the driver to this trend, and will be observed especially in the BRIC (Brazil, Russia, India and China) economies, which have doubled their gold reserves since 2003.

When the U.S. central bank first enacted the vast quantitative easing program, prompting investors to buy gold as a safe-haven and hedge against inflation two years ago, concerns over market devolution were at an all time high. With the recuperation of speculative markets, investors are still prepared for inflationary moves by the U.S. government.

Predictions aside, surprise economic events that may impact gold prices in the forthcoming 12 months, and the anticipation of another U.S. debt ceiling shut down in the first month of 2014, tapering of the Fed’s debt equity investments, and inflationary pressure from the international oil market and its ties to the price of gold may produce unexpected consequences.

Global Forecast for Gold Investment
It is the advanced economies that will be in for unexpected twists and turns in the next four quarters as the global recession comes to an end. How the gold price will be impacted obviously has much to do with the stakes mentioned, yet there is strong indication that the gold market will remain a decent investment for many investors still looking to precious metals for tax exemption from transfer of portfolio assets.

Volatility in the price of gold connected with sweeping political change is one prediction. Some investors are even countering the general consensus, suggesting that if fluctuation, the current gold price levels will rise even higher in the next year. Those making such bets are largely focused on gold prices measured against Chinese imports of precious metals, and particularly bullion and other fabricated assets.

Will investors be in for a robust return of physical gold investment in North America? Not as likely as in Asia and Southeast Asia, yet for sellers bullion and fabricated gold assets offer better than estimated returns in those markets. In July 2013, China imported 129.2 metric tons of gold, and increase from 113 tons in June. The rise reflects a 70% rise in physical gold importation by the country in 2012. In 2014, continued advance in China’s gold importation indices is expected.

Gold Investing
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