Gold Price Crash despite the money flood of the central banks & the many geopolitical conflicts around the globe & the still unresolved Greek crisis. Since its all-time high in 2011, the gold price has collapsed by almost 50%. Is the crash on the gold market – chance or danger?
Gold Price Crash – Chance or Danger?
We have experienced a real gold market crash in recent years. Since its high in 2011, the gold price has already lost more than 40% and is currently quoted at $1090.
Gold has always been the subject of the wildest conspiracy theories such as that the big investment banks or even the central banks themselves are behind the price declines of recent years or that German gold in the US vaults has long since been cleared, melted down and resold to the Chinese.
A few months ago, however, we were already at a similar level. The gold price was quoted at $1140 in November of the previous year, before rising an impressive 15% to $1300 in a few months. So there is certainly no lack of volatility.
The shiny precious metal leaves no one cold and hardly any investor thinks gold is just another investment opportunity. The gaps between the “gold beetles”, who see the precious metal as the ultimate crisis currency and expect an imminent end to the paper-covered monetary system, and those who disparagely speak of a precious metal without any industrial significance, are too deep. The latter therefore see it as a pure object of speculation.
Against this background it is therefore not always easy to take a sober look at the facts and deduce whether and when a good time to start is. But in the end, the only thing that counts as a trader is whether you can earn money with it or not.
So what does it look like at the moment? Are the recent declines a good buying opportunity or can we expect further setbacks?
Gold Price Crash – Market Expectations and Price Drivers
At the moment it looks more like the latter in the medium term. Even the majority of market participants do not see things any differently. According to Bloomberg News, analysts currently expect further declines of around 10% to just below $1000 an ounce by the end of the year.
Of course, this does not mean that skilled traders cannot make decent short-term profits by buying gold or gold mine operators.
Spring Rally – A Bull Trap?
The 15% rise we saw at the beginning of the year turns out to be more and more a classic bull trap. Weak consumer consumption figures, slumps in many sentiment indicators, the never-ending conflicts in Ukraine, Syria and the ongoing Greek crisis had once again convinced many market participants of the need for higher insurance cover in the form of gold.
In the meantime, however, more and more positive economic signals are coming from Europe and the USA and it seems that global fears of recession have largely vanished. Even the EU seems to have been able to grow strongly again in 2015 for a long time.
Gold Price Crash – Is the Gold Super Cycle Over?
While neither the conflict in Ukraine was resolved nor the Greek crisis could be completely overcome, all this does not seem to be the focus of investor interest anymore.
What weighs much more at the moment are the surprisingly clear statements of the US Federal Reserve to raise interest rates this year. These have further boosted the US dollar and thus ultimately damaged commodity prices. It should also not be forgotten that the long-term trend in the gold price has been pointing south for some time, namely since 2011 when the commodity supercycle came to an end.
Starting in the 1990s, commodities such as gold, copper and oil had benefited from rising demand from developing countries and shaped a 20-year upward trend (supercycle). This, however, ended in 2011.
In view of the Fed’s “promise” to raise interest rates before the end of the year, the US dollar is likely to remain strong against the euro, yen and other currencies.
On the other hand, falling commodity prices do not seem to have led to rising demand, but on the contrary to falling demand via feedback mechanisms in the emerging markets.
Our fundamental conclusion: There is much to suggest that we experienced a classic bull trap in the spring of this year and that the gold market crash will continue.
Trading yes, caution but with longer holding periods
Although the general weather situation is currently anything but sunny in view of the gold market crash, skilful traders can of course benefit from the high price fluctuations again and again by buying gold or gold mine operators with good timing. Not all factors speak against buying at the moment.
At the moment, despite the gold price crash, fundamentals speak little in favour of buying gold or gold mines. For active traders, however, this does not mean that there will be no lucrative opportunities to take advantage of the enormous fluctuations. Due to the leverage effect, we recommend the occasional purchase of mine operators for clever market timers, as the earnings potential is much higher here. Read more of this article about what is a bull trap for more details.