Is this the right time to buy gold?
Investors started buying gold as the fears of the European debt along with the concern that the US Government might default. This resulted in the gold prices touching $1600 an ounce on Monday. Copper is 14 per cent higher now than it was in May, when copper prices were $8,504.50 a ton. Analysts expect it to be close to February price of $10,190 which was a record price.
Both these investments are a gamble. You will buy gold on the hunch that European debt issues and the US deficit will not be sorted out soon. So if you will buy gold on the notion that the global economy is finished and that the troubles in the US and Europe will not be resolved in the near future.
Investing into copper is on the basis that the Chinese demand will continue to grow. Are these assumptions is right? On a superficial level the answer is in the negative. Both the US and Europe are likely to bail themselves out of these problems some time or the other and put their economies back on the road to recovery. If they don’t, then the global economy will go back into a recession that will impact China also.
So if the US and European issues are solved and the market sentiment turns positive then the main prop for the gold rally will go. Even if this need for a safe investment goes away it does not mean that people will not buy gold. But the price of gold would revolve around the demand from the jewelry industry and from central banks.
There is no reduction in gold production, though estimates reveal an increase in 2012. Analysts point out that there is a correlation between the price of gold and that of crude. The average price of gold is 16 times that of a Brent crude barrel; the ratio now stands at 13.5. But question still remains for the investor looking for a sound investment, should he buy gold now.