Who can accurately forecast the price of gold? Nobody. And that’s the truth.
Go to a financial website, open a newspaper or just listen to the chatter of investors, and everyone will give you a forecast as to the price of gold next week, next month and next year.
But the truth is, nobody knows.
With a lot of experience, some good technical charts, and a good grasp of the sentiment in the market, an expert trader can figure out what is likely to happen to gold prices for the next few days. But beyond that, thing get very speculative.
On what do I base this claim?
Well, you just have to look at the track-record of some of the people and organizations who have tried forecasting future gold prices over the last few decades.
After gold had fallen from a high of $875/oz to $600/oz in 1981, many high-profile academics and high-profile chartists forecast it would soon shoot above $1000. Instead, it entered a 20-year decline.
Between 1999 and 2002, Gordon Brown, then Chancellor of the Exchequer in the UK, cost taxpayers an estimated £2 billion by selling 400 tonnes of gold at the very bottom of the metal's 20-year bear market. That represented 60% of the country’s gold reserves.
Gold mining companies have recently been buying back massive hedges. In other words, they are changing their minds about the future price of gold.
Put simply, nobody knows where gold prices are heading. It doesn’t matter whether they are the head of a central bank, a respected academic, a gold mining company, or a professional gold investor.
And that’s not even counting the gold-bugs who insist the price of gold is about to go through the roof. They always say that. When prices go up, they are proved right. When prices go down, it’s the result of some conspiracy. One way another, they are always right.
The bottom line? You just can’t tell.
Should you worry about not being able to forecast the price of gold? That depends. If you are an investor, yes. But if you buy gold because you want to own it and keep it, as a safety net, price fluctuations are not such a large concern.
Yes, it would be nice if the price of your gold rose. And it would be disappointing if it fell. But the point of owning and keeping gold, in the form of bullion coins or bars, is to maintain a safety-net for yourself and your family, and not to make a killing on Wall Street.