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Opportunities for investors rise as gold prices weaken

The price of gold tumbled sharply in November with some experts predicting that 2013 could mark the beginning of the end of the latest boom period for the precious metal.

However, rather than being a worrying development, some investors are welcoming the news and using the low market prices as the opportunity to snap up bullion at bargain prices.

Sharp drop

Gold has been riding high for the last 13 years with prices going from strength to strength, boosted by the fragile global economy.

But this mood looks set to be interrupted – at least temporarily – with indications that the yellow metal is suffering a fall in its value.

The price of Gold has been falling during 2013

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During November gold dropped by 6%, adding to the overall plunge in price recorded during 2013. If markets remain unchanged by the end of the year, gold will have recorded its first annual price reversal since 2000 with around a quarter of its value wiped off in just 12 months.

Many shrewd investors had moved their money into gold, keen to enjoy their share of the 550% increase in its value which it had notched up in just a decade. And whilst other markets have wobbled or crashed, the precious metal has slowly and steadily risen – until now.

Improving economy

One of the biggest factors in the turnaround of the fortunes of gold is the current economic landscape. Whilst things still look a long way from perfect, there are growing signs that the finances of some of the world's giants such as the US are stabilising, leaving gold as a less essential asset for many.

In times of a struggling economy, gold universally is sought out as a safe haven for investors. However, as matters improve, the reverse is true and the price of gold retraces...until the next time.

Irrespective of short-term volatility history shows gold is a good long-term investment

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Some of the wild price hikes which gold has seen in recent years have made it difficult or impossible for some investors to buy bullion. And this is exactly why many are applauding this recent drop in price as the opportunity they have been waiting for to get some gold bullion into their portfolio.

Underlying demand

Whilst on the surface, the recent news from the Federal Reserve in the US could spell disaster for gold prices at least in the short term; some experts believe that the overall upward trend will still continue.

Gold expert Michael Lombardi has predicted that the recent pull-back will not detract from the upward move in price which has been growing since 2001. He believes the current reversal should be explored as the ideal time to buy into gold, before the market recovers and starts to head higher once more.

Mr Lombardi has researched the gold market from 2001 to date and has found that each retracement has very quickly been followed by another surge in price. He believes this is what the market is experiencing right now, making it the perfect time to invest in bullion.

Demand in India has dropped off, primarily due to the introduction of eye-watering import taxes leading to an increase in domestic gold recycling rather than purchases. However, more than making up for this is China where the demand for gold is almost limitless for both bullion and gold jewellery.

Central banks have also purchased large reserves of gold in recent years to shore up their real assets.

Whilst there may be some signs of a temporary retracement, many believe the current bearish sentiment is nothing more than a pause to allow investors to grab an asset at a rock bottom price.

Image Credits: Kentee Gardin and Maura Teague

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