We must first weigh the “possibility of loss” when deciding whether to invest in gold. Even though some claim that gold’s price has always been rising, it is actually extremely risky to invest in gold without knowing it. Because gold’s price varies, it’s crucial to comprehend the market price trend before making a decision. Will there be a chance that the price of gold will fall dramatically? Investment websites everywhere extol the virtues of gold investments, but it’s uncommon to find information about the risks associated with the recent sharp decline in gold prices. The market prices for gold, platinum, and palladium have also changed significantly, particularly with the recent spread of the new crown pneumonia epidemic. Hence, review your investment under the control of all risks. The rule at the beginning of investment is to understand the risks of the investment itself, not just the charm. This time I will explain about the collapse of the gold market before investing.
Why the price of gold plummeted
When purchasing gold for the first time, the “possibility of the gold market collapsing” is the thing that worries people the most. The most alluring aspect of gold, when compared to other investment targets, is its stability, but if you look at the history of the gold market, you’ll see that prices have been rising and falling frequently. Consider the “possibility of a plunge” in advance in order to comprehend how to handle investment targets. What specifically could cause the price of gold to fall when the circumstances do so? The following lists five conditions in brief.
• Increased supply of gold
• Reduced demand for gold
• The world economy is stable, and the attractiveness of investment targets other than gold is rising
• Reduced geopolitical risks related to terrorist attacks and wars
• Rich people and investors around the world do not rush to buy gold
• Dollar Shock
• U.S. interest rate fluctuations
• The situation of the world (the tension of various countries, etc.)
In general, the dollar will strengthen and the price of gold will decrease as long as U.S. interest rates rise. On the other hand, the U.S. dollar will weaken and the price of gold will increase as long as interest rates in the country are on the decline. Additionally, the price of gold will be impacted by global circumstances. In fact, when the stock market is unstable, gold holdings will increase, according to investment news. Let’s examine a few historical examples of falls.
• As the Soviet Union collapsed, the U.S. dollar rise, and the price of gold plummeted. Due to the Asian economic crisis, the price of gold in Taiwan has dropped to a record low of 267/G Taiwan dollars.
• The world financial crisis caused by the bankruptcy of Lehman Brothers. The international price of gold is USD 681/1TOZ, and the price of domestic gold in Taiwan plummeted to 704/G (October 2008)
• Investors are not optimistic about the prospects due to the Cyprus problem. The international price plummeted from USD 1,501 per 1TOZ to USD 1,360 (April 15, 2013)
*TOZ: Troy ounces. Unit for calculating the mass of gold
*Records international prices and domestic prices/p>
If wealthy people and investors around the world start to believe “you don’t need to buy gold at all to avoid risks,” the scenario known as “gold market crash” may actually occur. However, gold has unwavering trust as a long-term investment goal, much like the public perception of “gold hedging.” The Coronavirus will threaten the entire world in April 2020. The Coronovirus has caused investors’ attention to turn more and more to gold as a “safe asset.” The price of gold on the world market soared to USD1,691/1TOZ in March 2020. As a result, “gold hedging” has received a lot of attention.
What if the mining volume increases in the future?Due to its rarity as a precious metal, gold is highly prized. Since the dawn of time, people have used gold, and the earth has seen extensive gold mining. People are curious about how the gold market will change if more gold veins are found in the future and more gold is mined. As long as there is more supply than demand, the price of gold may fall even if the number of people who want it rises. These days, mining’s potential is very constrained. Future technological advancements might make it possible to mine more gold than is currently possible. However, the cost of mining will also rise if you want to extract gold from the seafloor and crust. In order to recover the cost of mining, the price of gold is bound to rise. In other words, even if there is theoretically enough supply and the supply actually increases, the price of gold won’t necessarily decrease. In actuality, the price of gold, not the amount of remaining resources, is the biggest issue. Therefore, even if new technologies are developed to increase the amount of gold mining, the likelihood of a sharp decline in the price of gold is still very remote. From a long-term standpoint, the price of gold continues to be stable. However, the amount of yesterday, today, and tomorrow will vary due to the daily fluctuations in the gold market. Any time you want to buy or sell gold, you must check the current market price. From a long-term perspective, the possibility of a plunge is very low. Future predictions indicate that gold will remain a desirable investment. In recent years, gold has also started to gain attention as a material for parts of electronic devices and other industries. Nowadays, the majority of people own mobile devices like tablets and smart phones. The use of gold in industry should rise in the future. From the standpoint of human development, it should be extremely challenging to live a life without gold. The demand for gold will continue to be high due to the growth of emerging economies, and a long-term decline in price is unlikely. even though the gold market has significantly increased since the year 2000, many experts still say that “the price of gold is still low.” In order to protect their assets, many investors will exchange a certain percentage of their assets for gold.
From a short-term point of view, it is also necessary to guard against the gold market plummet
From a long-term perspective, there is very little chance that the price of gold will fall. However, the situation is different in the short term. Market prices could decline dramatically for a variety of reasons, including the movement of global funds. In actuality, there has been a decline in the price of gold globally in recent years. Many investors will exchange their gold holdings for more appealing investment opportunities. As an illustration, think about buying platinum. Like gold, platinum is currently in high demand for the production of jewelry and automobiles and is a very popular investment goal. However, due to the spread of the Coronavirus infection, the price of platinum has drastically decreased globally. The primary causes are the sharp rise in infection rates in Europe and the closure of mining facilities in South Africa, the source nation. International prices should increase if the coronavirus eventually recedes. However, there is still no indication that it will end, so it is reasonable to anticipate that there will be frequent changes in market price. The same is true of palladium investments. In February 2020, palladium reached its all-time high price of USD2,789/1TOZ, but due to the sharp rise in the number of Coronavirus infections, demand lagged. After a month, it dropped to 1,355 USD/1TOZ. Then comes gold. It is challenging to prevent inflation even though the market price of gold is largely stable, it is difficult to avoid the impact of the Coronavirus. Although the price is still rising, it has the impression of a sharp fluctuation compared with usual. If you want to consider selling gold from the perspective of short-term investment and you want to “make profit as much as possible”, it is recommended to carefully decide the period of time to sell.
Pay attention to USD pricing
There are other considerations in addition to the value of the gold itself that must be taken into account when determining the value of gold based on the “purchase price in Taiwan.” In addition to exchange rate fluctuations, the Bank of Taiwan’s gold deposit is priced in grams, while the Bank Building Association charges a different price that is expressed in cents. In most cases, US dollars are used to trade gold. On the other hand, the price of gold sold in Taiwan may vary depending on the exchange rate between the Taiwan dollar and US dollars. Taiwan dollars are used in trade in Taiwan. We must pay attention to this point specifically because gold is a global investment target. Even if the price of gold denominated in dollars falls, the Taiwan dollar price may not necessarily fall at the same rate. It must ultimately be evaluated in Taiwan dollars. The value of the Taiwan dollar has increased recently. It is connected to the recent international growth of the Taiwan gold market. The cost is 10,000 Taiwan dollars as opposed to 1 kg of US dollar gold. Please consider Taiwan’s diversified situation before determining when to sell.
Universal value guaranteed by chemical properties
Throughout human history, the price of gold has fluctuated. There will occasionally be a dive. This does not, however, imply that the value of gold has decreased; rather, it is the outcome of the equilibrium between supply and demand. Because of the chemical characteristics of gold, it has value. Gold is a metal that resists corrosion and oxidation. It can be rebuilt even if it melts. Gold is often valued highly and is referred to as “the metal that will not vanish.” This natural setting offers this investment target complete tranquility. As a result, the guarantee provided by this chemical property should be “lower possibility of value plunge.”
Buy slowly from a long-term perspective
Beginners want to start making gold investments, too! When you consider it in this light, it is advised to buy gradually after realizing the long-term upward trend in gold prices. From a long-term perspective, there is very little chance that the price of gold will fall, making it a very appealing investment. Having said that, it does not follow that owning gold makes one wealthy right now. It is advised to use the extra funds to gradually purchase with the idea of holding them for a long time if the selling time is not favorable because losses are still very likely to occur.