When looking at gold prices these days, it is important to have a long-term focus in mind. The precious metal is certainly down from its all-time highs, but has great prospects going forward.
Before going into details, just look at the long-term chart of gold prices below and pay close attention to the circled area.
Chart courtesy of www.Stockcharts.com
The investment community has shunned the yellow metal just by looking at what has happened since 2012 (the circled area). The precious metal is deemed useless by many well-known advisors and investment houses, recently being called a “pet rock.”
Sadly, the long-term trend is completely disregarded.
Gold vs. Stocks: What’s the Better Investment?
Here’s what investors really need to know; between 2001 and 2012, gold had a solid run. The yellow metal price increased from below $300.00 in 2001 to closing at about $1,700 in 2012. This represents an increase of over 460%.
Between 2013 and now, gold prices have declined little over 35%.
It’s almost comical; no one is really talking about the increase gold prices had, but everyone is focused on the decline. Mind you, the return on gold far exceeds the return provided by the key stock indices like the Dow Jones Industrial Average even today when the precious metal is down!
You see, technical analysts look for a few factors when analyzing charts. They will look at how the price is reacting, if there are any trends developing, what kind of participants are dominating the market—sellers or buyers—and so on so forth.
When looking at the gold chart above and paying attention to the circled area, there are few observations that shouldn’t be overlooked. At the very core, they suggest gold prices may be finding a floor soon.
Consider this; if there were sellers dominating the market, we would see gold prices tumble like they did in 2013. In 2014 and so far in 2015, we haven’t really seen any massive sell-off. In fact, if you pay attention, the trend to the downside is flattening.
Where’s the Gold Price Headed Next?
Just by looking at the charts, it appears that the sellers are slowly running away, and failing to take the prices lower or there are a number of buyers increasing and simply absorbing the selling.
From a fundamental perspective, gold seems to be in very solid shape. In fact, fundamental factors suggest there’s a huge sale sign on the yellow metal. There’s demand surging, supply plunging, and above all, an abundance of uncertainty in the global economy.
After forming a top in 2007, the stock markets never returned to the same levels until 2013—six years later.
Dear reader, it is often said that patience is a virtue. Gold investors need to think long-term and ignore the short-term noise. It took the stock market six years to get back to its previous highs. Gold, as I see it, will not take this long. In fact, in the next few years we could very well see the highs made in 2011, again.