Gold price hits six-month low

The price of gold (in $US dollars) dropped to a six-month low at the halfway mark of 2018. Financial analysts have explained the drop on rising interest rates in the US. This has led investors and fund managers to move more of their funds into cash. 

The price of gold in Australian dollars has decreased in recent weeks, but it actually bottomed out in 2018 in late January. The differing values are due to exchange rate fluctuations between the two currencies. On the back of rising interest US rates, the Australian dollar has devalued in relation to the US currency in 2018.

Is now a good time to buy gold?

There is an old investment adage to ‘buy low and sell high’. In other words, to buy when prices are low and sell when prices are high. Market prices for precious metals like gold fluctuate. But predicting when the market is at its lowest point (or has bottomed out) is notoriously difficult. Unfortunately, no-one has a crystal ball to predict the future.

The price of gold depends on many factors like supply and demand, the global economic and political climate, as well as the currency exchange rates that we’ve mentioned. There are currently a number of reasons that have led some analysts to believe the market is at a low point and that gold prices may rise in the short to medium term.

These reasons include:

Current yearly global demand for gold far outstripping global production. The supply gap is only being filled by holders of gold happy to sell their physical holdings. If gold demand outstrips supply any time soon, prices will rise.

  • The risk of trade wars among major international countries and regions on the back of recent US decisions to increase tariffs on specific products from specific countries and regions (e.g. from China and the European Union). During times of economic and political uncertainty, gold is viewed as a safe investment haven. That’s because demand is likely to increase, and their will be fewer holders willing to sell.
  • Rising interest rates in the US could lead to inflation. If this happens, it devalues the US currency, and investors are likely to transfer their funds to other asset classes like gold.
  • Many share and property markets around the world are believed to be overvalued. This view could encourage investors to see the safe haven of gold instead to avoid losing their funds in a market crash.