The cycle of the gold prices is quite different in various periods of time, depending upon the economic indicators, world events and long-term investments. Over a few months or weeks, which is the short term, the price of gold is very volatile. Inflation, interest rate, geopolitical and economic reports that may be incorporated in the daily news may lead to sudden changes. Price increases or decreases are sudden most of the times caused by sudden conflicts or announcements by the central bank or a change in the value of different currencies. This volatility makes the trading in the short term risky and at the same time appealing to investors who want to make swift profits.
In the medium term, which is a few months to a year, it is possible that the prices of gold will not be that low since there is uncertainty in the world. Constant inflation, fluctuating financial markets, and unending geopolitical risks are usually favorable to the high demand of gold as a safe-haven commodity. At such times, short-term variations may take place but the general trend may be uphill or flat at higher points. Gold reserves are also likely to be retained by investors as a security against economic instability which in turn preserves its value.
Over the long run, in the span of a number of years, the prospects of gold will mostly rest on the basic demand considerations and diversification. Large institutions and central banks and long term investors still believe that gold is a significant asset in the preservation of wealth and is also a way to balance investment portfolios. According to these structural forces, gold is capable of staying strong as time goes by. But its price does not necessarily increase steadily. The times of correction and consolidation are natural but the long time trend tends to show the aspect of gold as a good store of value in the international financial system.
#Goldreference