http://www.businessweek.com/articles/2013-04-15/the-price-of-gold-is-crashing-dot-heres-why#r=read
This article discusses the crumbling price of gold. It says that the most important factor for this plunge is the falling global inflation rate, which is a problem because many investors hedge the value of gold against rising inflation. JPMorgan has backed the forecast that inflation will continue to fall.
The investors who hedged gold are scrambling to get a decent return on their investment.
Gold’s drop since Friday to a two-year low of $1,355.80 an ounce is the sharpest drop since 1983, when the last gold bull market was. Gold has enjoyed a great run over the past decade. Prices surged more than seven times since 2001 to an all-time high of $1,920 an ounce in 2011, as investors turned to the metal as a haven from turmoil in the rest of the financial world. However the falling price has already started to impact imports, which could eventually lead an increase in the exchange rates as we import this precious metal from several foreign countries.
ReplyDeleteI agree with Maggie; Besides, its only logical that gold prices will rise as it becomes more scarce in the long run.
ReplyDeleteThe falling price of gold will certainly impact investors. Especially with the common belief that gold is a reliable investment that will never fail. In addition, countries that are forced to pay off debts with gold (such as the recent case of Cyprus) may have a harder time unless the price of the precious metal begins to rise again. It remains to be seen what the future will bring but it seems somewhat unlikely that it will rise again very soon.
ReplyDeleteThis is why it is always smart to have a diversified portfolio when investing. I am a fan of the laddering approach which consists of five separate investments within the portfolio. There is also the barbell approach which is a 50-50 split in investment that I am not as fond of. It is absolutely not smart to ever invest all of your money into only one area.
ReplyDeleteIt is good to have a diversified portfolio. That way if one of your stocks is going down your whole portfolio will not go down as well. We also need to be aware of the inflation rate going too low which could also be detrimental to our money's value.
ReplyDeleteThis is certainly bad for hedging, however the average investor will not be harmed to much by increasing gold prices. Unfortunately these predictions tend to be self fufilling prophecies, and it will be difficult for gold hedgers to recover their intial investment
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