The price of gold has seen some moderate declines in recent days. Although some may attribute these declines to the FOMC meeting commentary on Wednesday, there may be other, simpler forces at work.
On Wednesday, the Fed reiterated its plans for another interest rate hike this year, and the central bank says it remains on track for another three rate hikes next year. The Fed seems intent on following through with its plans despite a significant lack of inflation and other issues that could potentially give the bank reason for pause.
Although gold’s reaction to the commentary was bearish, there is likely a much simpler explanation for gold’s downside in recent days: It’s called profit taking.
It is likely that many short-term traders have gotten long gold in recent weeks as they watched the metal moving higher and higher. Many of those same short-term traders have possibly caught a good chunk of the recent upside, and decided that the Fed was reason enough to cash out. This, however, may present an excellent opportunity for the long-term, patient investor.
Gold could be considered “on sale” right now from where it was a week ago, and when prices dip like this it can be an excellent buying opportunity for those looking to scoop up the metal for the long-term.
After all: Does anyone really think that the idea of slightly higher rates over the next year will become a major obstacle to higher gold? The idea of the Fed reigning in its balance sheet is already being discussed as the potential catalyst for the next major stock market crash. Does anyone think the stock market is not going to reverse course at some point?
A stock market crash could potentially send gold and other hard asset prices soaring as investors look for alternative asset classes to put capital to work in. As stocks gain steam heading lower, the Fed could be forced to rethink its plans-and rates could stay around current levels (or even lower) for a long time to come.
Stocks aside, there are also numerous geopolitical issues that could potentially fuel further demand in gold. North Korea just threatened to test another hydrogen bomb-perhaps as soon as this weekend-over the Pacific Ocean. The rhetoric between the north and the U.S. has taken on a worrisome tone, and unfortunately, the conflict could be headed to new levels. Hopefully, military action can be avoided.
The point is this: For those investors who can see the forest through the trees, moderate dips in the price of gold should not only cause worry, but they should be welcomed. Now may be a great time to buy gold at a relative discount, before stocks crash and gold potentially moves higher.
Speak with an Advantage Gold account executive today about the potential benefits of physical gold ownership. Our associates are here to answer any questions you may have, and can even show you how to buy and hold gold using your IRA account.
Don’t wait for the next major stock market crash or for gold prices to rise further before taking action. Explore your options for physical gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, central bank, fomc, gold, inflation, interest rate hike, profit taking, trading