Gold has long been prized by civilized man for its appearance in jewelry, its steady value as a type of currency and even it’s functional use in modern-day electronics. These characteristics and much more draw many individuals and savvy investors to pay attention to the price of gold.
Since the dawn of the “Great Recession” in 2008, the gold’s price per ounce has risen and has stayed relatively high. It tends to not react with the same kind of volatility that other stocks and ETF’s. Yet there have still been sometimes when we’ve seen the price of gold fluctuate.
To truly understand the driving forces at play in determining gold’s price per ounce, it helps to take a closer look at the plethora of factors that influence it.
Understanding The Art And Science Of Determining Gold’s Value
There is a certain blend of art and science that goes into predicting gold’s price per ounce. On the scientific or analytic side of the equation, things like gold demand and gold supply serve as a sort of nuts and bolts way of evaluating gold’s value in the present as well as a potential metric for the future.
As a general rule of thumb, the further into the future you attempt to predict gold’s value, the more difficult it becomes to take stock of all the fundamental factors. This is especially true with the technical aspects that contribute to gold’s price.
If you wanted to predict golds price per ounce on an intra-day basis, you will need to pay close attention to trends and other market indications that appear on the short-term and medium-term charts. Long-term charts can also be useful, however, they tend not to be as prevalent for intra-day predictions.
In a situation where the shorter-term charts suggest that a move larger than $5 is likely to occur, resistance/support could potentially arrest gold’s price move. This might mean that the short-term signal would not be as reliable as it may seem, based simply on the short-term chart alone.
Most of the time these factors don’t work both ways. The things influencing the longer-term charts can be more meaningful than short-term trades. Yet on the other side of the proverbial coin, the short-term factors may not change much.
Let’s say for example that you expect a $100 gold move in the coming weeks. However, it might not mean much for the immediate-term gold chart which could have hinted at a $3 corrective move beforehand?
News And Forecasting Gold’s Price
Reacting to gold news items and using short-term information to guide your expectations on gold’s upcoming price changes likely won’t give you an edge over the competition. Sometimes, you can be quick enough to capitalize on a freshly dropped new item, but smart investors and fund managers have access to the same information and they have advanced software that allows them to move with lightning fast efficiency. This tends to make a single news item priced in as soon as it drops.
The one strategy that might be able to give you the upper hand on the gold market is to use subjective factors like sentiment analysis, technical analysis, and fundamentals, as well as past cycles. In a certain light, this can make gold forecasts possible through an estimation of gold’s relative strength in direct reaction to a single news article or market correction.
Should the price of gold move in a given way, such as a rally, based on an important factor like an announcement of quantitative easing by a major financial organization like the European Central Bank, and it doesn’t happen to react but in a way that appears odd it could mean that gold’s price is due to a significant decline.
Predicting Short-Term Gold Rate
When it comes to predicting gold’s price per ounce in the coming day, or hours you might want to try using 30-minute or even 15-minute charts. You might also want to consider 2-hour or 4-hour charts. This might help you evaluate important resistances and supports which can potentially invalidate the short-term analysis.
Long term Forecasting Gold’s Rate
The fundamental analysis of gold’s medium-term as well as its long-term charts tends to be more specific than the broadest point of reference in charts themselves. Keeping this in mind the fundamental points could end up superseding the most technical aspects.
One example to consider is gold’s bull market bottom in 1999. At that time the gold Elliott Wave Theory proponents began predicting a collapse in gold prices. Prognosticating that gold would fall hundreds of dollars lower. Yet this prediction ultimately didn’t materialize for years.
This begs the question, why?
When we take a closer look at it, gold fundamentals were very favorable. Then the 2008 slide was somewhat artificial when you consider that it was primarily driven by a liquidity squeeze in the investment funds, which also held some portion of their diverse portfolios in gold.
Determining Your Prediction Strategy
The timeline of your prediction is ultimately going to be a major factor in the gold price prediction strategy that’s right for you. Short-term and long-term predictions will need to use different sets of techniques.
When it comes to the technical methods, you will find all the key details that weigh in your investment strategy. When rebalancing or diversifying your portfolio to include more gold, you should strongly consider seeking out professional consultation.
This Year’s Gold Forecast
If you are looking to glean some insights on gold’s likely value throughout all four fiscal quarters of this year, all the same rules apply. You will need to take into account both the fundamental as well as the technical issues. Considering that these scenarios are constantly changing, you might not be able to predict the entire year in advance. Instead, it may be better to take it week to week, or month to month to determine a quarterly strategy.
You might want to also consider finding one of many websites that provide Gold & Silver Trading Alerts to help keep you dialed in on precious metal market trends on a daily basis.