Gold has been on quite a rollercoaster recently from $1200 to $1800. But you may be wondering why gold is now more affordable!
Well, IMHO, one of the biggest reasons gold is priced down is that there are fewer expectations of inflation, economies are sluggish so aggregate demand for goods & services is slowing. So we’ll have higher unemployment, less spending power, and ultimately lower inflation.
This is certainly true in the Eurozone. And mostly true in the US. It’s only when there is excessive demand for products that prices will start to surge again.
However, there is also the opposite scenario: crash & burn. In which case, the West goes to hell in a basket; and price of gold goes through the roof again. We might see a little more risk-based fretting in the news… esp. with Greece & Portugal. Bond prices there are jumping again…
But ultimately, we’ll just muddle through. The type of scenario where growth is anemic, employment & wages stagnate, but not enough to trigger a flight to safety again. Expect Gold to wallow as a result US$1100~1200 until a firm direction is established to the upside or downside for the remainder of 2013.
Should you buy or sell gold in the meantime? What do you think?