Why Did the Gold Price Fall Today?

What Happened to the Gold Price?

Gold in US dollar terms fell nearly $30 an ounce, or nearly 2%. In Aussie dollar terms, the fall wasn’t as harsh. This is because the Aussie dollar fell against the US dollar too.

Why Did This Happen to the Gold Price?

There are always explanations offered for gold’s daily price moves. Often these explanations are just guesses. The sharp fall in the US dollar gold price is partly because the market thinks the US Federal Reserve will start raising interest rates sooner rather than later, and partly because of profit taking. Gold has had a very strong month on the back of concerns over Greece and the Eurozone in general. It’s natural for selling to take place after a strong run in any asset.

What Now for Gold?

It’s natural and healthy for assets to pull back after a strong run, and gold is no different. It will be a positive to see gold remain above or around the US$1,250 level in this correction. If it does, it will lend weight to the idea that a new bull market could be emerging for the precious metal.

This makes sense given the fragile state of the Eurozone. Gold loves monetary disorder, and if one of the world’s most important fiat currencies (the euro) is under threat, gold will do well.

However, if the gold price falls back below US$1,200, you can assume the bear market that gold’s been in for the past three years or so will continue to drag on.

Regards,

Greg Canavan+
for Markets and Money

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Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing. He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’. Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

 


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