E Will A Predicted Gold Price Drop In 2017 Make It A Good Time To Buy?

The price of gold has plunged since late October, but most that decline came following the election of Donald Trump as the next president of the US. And while this could have been nothing more than a coincidence, the subsequent resurgence of the US stock market and the strengthening of the USD suggest that more declines for the yellow metal could be around the corner.

As such, investors will be ready to pounce once that happens, and they could do that in several ways. They could buy gold stocks, trade the yellow metal, or it could be a good time to turn your IRA into gold. After all, one of the world’s oldest investing philosophies to buy when the prices are low.  So, let’s examine whether 2017 will be a perfect opportunity to invest in the precious metals market via gold.

The spot gold prices in the futures market dropped to $1,160 level on Tuesday, which is the lowest level since January this year, and judging by the current momentum, they could fall further through Q1 next year. From a technical perspective, the price of the yellow metal has reached a critical support level, as demonstrated in the chart below, which suggests that if the prices do not rebound from this level, then the decline from thereon could be massive.

(Click on image to enlarge)

Analysts are predicting that the price of gold could easily hit the lows witnessed late last year when it came close to trading below the $1,000 level since breaking the threshold during the global financial crises of 2008/2009. In fact, some reports already predict that the yellow metal will drop below the $1,000 level in 2017, for the first time in nearly 9 years.

A downward breakout from the current resistance zone of $1,150-$1,200 would set a target of $1,050-$1,075. At this level, the price of gold will be locked in a range it during Q4 in 2015.

At the time, there was a high expectation on the US Federal Reserve to raise interest rates, which from an investing perspective makes the stock market more attractive and the USD stronger. Both scenarios are counteractive to the value of gold bullion.

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Disclosure: The material appearing on this article is based on data and information from sources I believe to be accurate and reliable. However, the material is not guaranteed as to accuracy nor ...

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Gary Anderson 1 year ago Contributor's comment

It will be interesting to see if rate hikes fail to affect the long end. I think that is likely. JMO.