Forecasting Gold Price. An Art? Science? Both?

Posted - April 5, 2023
Forecasting Gold Price. An Art? Science? Both?

Forecasting the Price of Gold

One might argue that forecasting the price of gold or any potential investment is a fool’s errand, that it simply can’t be done. It’s a fair suggestion. After all, forecasting gold prices is a difficult process. If it were easy, every one would do it. After all, if one did have hold of that magic formula and was able to specifically forecast gold prices from day-to-day or month-to-month well, the climb to the billionaire’s list would be swift.

Forecasting-Gold-Price-An-Art-Science-BothHowever, gold is a pretty steady investment and it does have a bit of a ‘tell’ as they say in the gambling world. If you were to study the history of gold prices you would likely spot some notable patterns. 

To start, the overall price of gold has risen sharply in the past twenty years. In April 2001, gold was selling at $438 dollars an ounce. As of this writing, the price of gold is not far from $1,900 dollars an ounce. Though it may not net a huge gain over the course of two decades, the tale here is that gold does make for a steady win when it comes to a proper investment. 

Forecasting the Value of Gold in Volatile Conditions

Another look at the chart allows for yet another reveal. The overall price of gold reached its highest peak in February of 1980. What was happening here that led to this steady rise and cap? The answer is easy. The 1970s.

The 70s represented a volatile time in our nation’s economy. Interest rates were hot and rising as inflation set in and caused panic among consumers. Do these conditions and alarms sound familiar?

Historically speaking, gold has proven itself time and again to hedge well against less-than-ideal economic models. Consider again the chart and that first historical leap in the price of gold. This happened in 1930, a year after the Great Depression started. Gold held to those high-capping prices until 1939, the year the Great Depression ended and as America was on the verge of war. 

This is more than just a random pattern. There is a science here that tells us all about gold’s potential against inflation and recession. Many investors know that there is an ebb and flow that dictates how the price of gold fluctuates against the value of the dollar and rely on this balance to forecast gold prices

Forecasting Gold Prices Can Work for You

There is never really a bad time to invest in gold. It is a proven winner as it comes to long term investing.  However, as it comes to forecasting gold prices, there are some clear and telling signs to look for. Gold prices are almost always bullish against failing economies and a declining dollar. So, invest accordingly. With patience and the right conditions, gold can be a big winner for your portfolio. 

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