Any given day’s gold price may not reflect its real value to you, as a long-term investor in gold.
The recent fall is gold prices is largely the result of gold traders selling their gold positions in gold ETF holdings. And the volume of sales has driven the price of gold down.
Here is an interesting excerpt from a recent article at Fool.com:
“What’s more, the relentless march upward of the gold price — which began several years before the financial crisis — seems suspiciously correlated with the invention of gold exchange-traded funds. These now dominate gold trading, yet they were only launched in 2003. Gold ETF holdings rival the reserves of all but the largest central bank hordes. It’s hard not to suspect this sudden accessibility of gold as an asset has moved the price too far, too fast.”
Remember, “traders” are people who want to make short-term profits from changes in gold prices.
But you and I are “investors”. We don’t buy today with the intention of selling tomorrow if the price goes up. We invest in gold as a long-term insurance, to secure a proportion of our wealth in the form of a non-fiat, tangible and portable asset.
The value of an ounce of gold for us, as long-term investors, gets muddied by the activities of traders.
Last year, their buying sprees probably lifted the price of gold beyond its investment value.
And this year, so far, their selling sprees are pushing prices down, probably below its investment value.
As a gold owner, you need to try to discount the impact of short-term trading activities, and try to get a feel for the real dollar value of an ounce of gold as a physical asset.
Most important of all, don’t make any rash buying or selling moved without first considering the influence gold traders have on prices when they buy or gold in the form of ETFs.
Keep a steady hand, with your eyes on your long-term goals.