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Is Gold On its Way Back Down?

For the past 12 years in a row, gold has enjoyed rising prices, which is an extremely uncommon occurrence. Not a single year has seen a decline, which has brought many analysts to the conclusion that a correction must be due soon, meaning that we could see a steady decline in the value of gold in the coming months and years.

In a normal scenario, you’d expect an asset to correct around a third of its value every 18 months or so, but clearly gold hasn’t done this, which seems too good to be true. You should ask yourself: “do I need to sell my gold?”

One thing that’s preventing people from selling their gold is that the precious metal markets are now very volatile. Both gold and silver have been up and down considerable amounts this year already, with huge swings of 14 percent back in April. With volatility comes uncertainty, and many people may yet be hoping an upward gold trend will continue, and that they should hold on to any physical gold that they have.

There are also others however, that are getting out of physical gold because it’s too volatile, though some high profile names, including former US congressman Ron Paul have come out to say that gold is traditionally volatile, and always will be. He goes on to insist that holding gold is always a good idea to some extent, to protect against currency crashes. In reality however, most people will not factor this in to their trading, because it isn’t something they’re concerned about.

So which direction are things going to move in, and what should you do?

In the short term, there are always going to be ups and downs, because that’s simply what gold does. In the longer term however, the short upward spikes should not influence strategies; it certainly looks as though gold will be declining, because correction seems inevitable. It’s already down 17 percent this year as traders jump ship for high yield stocks.

This will draw many to the conclusion that physical gold should be sold now before prices drop. This includes both gold held through banks and brokers, and actual gold reserves that people might have in their own homes. Gold might be good to have in the event of a severe commodity crisis, but with many economies on the way up, it looks as though there are better places to hold investments.

Peter Christopher

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