What a week its been for gold: Starting out strong on the news that a last-minute deal was finally reached to save the US economy from teetering over the fiscal cliff. Gold and other precious metals didn’t have much staying-power though.
After a chance to digest the reality of the fiscal cliff deal, posting gains on Wednesday, things took a turn for the worse yesterday as market watchers felt that the US Federal Reserve’s monetary policy wasn’t favourable to gold. This also coincided with a weakening of the US dollar, a rare occasion where both precious metals and the dollar dropped in value at the same time.
The general consensus seems to be that the economy is now out of the woods, and demand for gold as an investment is on the way down.
So the question to ask is; do you jump on the bandwagon and sell now, or hang on in the hopes of the much-touted $2000 an ounce gold that everyone was predicting not too long ago?
Growing fears of inflation could signal an upward trend for gold, but if you sold now, it would be into a market that is currently feeling some downward pressure while still historically quite high. It has also brought positive gains for most precious-metals investors to this point.
Keep an eye on the market but don’t get too rattled about sudden changes, with the fear of inflation on the horizon, high gold prices are here to stay.