Why not to worry on gold investment of last year and this year
Immediate support: $1661.30
Key supports: $1563.7, $1605.40 and $1629.90.
Immediate resistances: $1717.20 and $1758.30
Key resistances: Fifty day moving average at $1817.90 is the key short term resistance.
In my view most of us have made investment in physical gold either last year or in early January. Most of us are worried whether we will breakeven in our gold investment. Forget making a profit in gold.
I have an investment funda “Whenever the herd/masses make investment or buy like a freebie I always look for signs of sharp correction”. Alternately “Whenever the herd/masses sell or exit an investment or is very fearful of any asset class, then I look for investment opportunities in that asset class” BUT fundamentals are the key for every investment.
Yes, I agree that gold does not have any fundamentals. Gold is just a hedge against man created banking money. The so called paper money or banking money value is on a state of constant decline post second world war. If you include real inflation even the current value of gold (after the current decline) is higher than it was say three months before. Please do not look at the state manipulated headline inflation. Look at YOUR real increase in cost of living (without reducing your post pandemic living standards.)
In real value term gold price still higher and will continue to rise. In nominal term gold prices have declined. Momentum is very bearish for gold. For some they will swear that they will never invest in gold and any precious metal. Financial markets have a tendency to remain on the opposite side for a much long time than most of us expect. The more the global liquidity the longer period of time will any asset class move in opposite direction of real fundamentals. This is happening with gold.
I have been telling my folks here in India that gold price will form a long term bottom by the end of this month. (if the falling trend continues after Federal Reserve meeting next week). In case I am wrong at the most till end June gold price can trade with a softer bias. There will be no looking back for gold at the most from July.
Bond yield should form a long term top by June. Hyper Inflation will make headlines anytime from June. There is a time lag between real price rise and headline inflation numbers. Stimulus gets over by the end of the year. Free pay checks from the state will get over. Then only all of us will feel the burden of extremely high cost of living and every rising cost of living. When this starts to happen gold price will break past $2000 and form a lower base of $2000.
I always advise on physical gold for long term investment. I have been against gold ETF investment. For the first time in my analytical career, I had advised to invest aggressively in “sovereign gold bonds” last week in India. If you have invested in physical gold then have the patience till June. 2021 is not yet over. There is a lot more to come. I am confident that gold will form a long term bottom first followed by a new historical high. However the pace of rise will be slower than last year.