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Johannesburg - Gold has had a stellar run in recent years, but in 2013 the yellow metal finally succumbed to pressure, losing almost 30% of its value.
Yet with a rebound in the first few months of the current year, investors are now considering whether the precious metal still has further to run.
Mabyanine Phiri, an expert trader at ACM Gold, said that for the rest of 2014, gold is likely to run its course between $1 080 and $1 400, with more inclination on the bearish side.
“If we analyse the price charts of gold, it is clear that the yellow metal is going through a correction, which might end at around $1 100," said Phiri.
"The best way forward for investors is to trade the daily and weekly volatility of gold in order to make short-term profits. For those who are more interested in a long term physical investment, we would suggest waiting for incoming strong support levels at around the $1 050-$1 100-$1 180 range.”
Phiri said there are a number of technical and fundamental reasons to this analysis.
The monetary policies of the US Federal Reserve, along with the performance of the US economy are major determinants when trying to figure out trends in the movement of gold.
Dollar
Currently, the dollar is going through the "taper", which helps to boost its value, while all dollar denominated currencies and commodities, including gold, take a toll.
This follows the quantitative easing programmes, which were initiated to give the US economy a much needed boost.
“When policy makers felt that the US economy was back on track, they decided to start the tapering. This means that future economic data such as US employment figures will be crucial in determining whether the world’s biggest economy is really back on its feet," said Phiri.
"If that is the case, we will increasingly see investors turning to the dollar for investment purposes, which in turn will drive down the demand and price of Gold.”
Adding to this, is the physical demand mostly from emerging powerhouses such as China and India.
China’s demand for physical Gold is critical and has a strong impact on Gold prices, often helping to support the gold price and give it an intrinsic value that cannot be found in most financial instruments.
“We predict increasing demand for physical gold in 2014, although only to a certain extent, which should help to stabilise gold’s price. Even though we believe Gold has been over-valued due to its safe haven nature, we would not advise against investing in gold,” said Phiri.
He noted that, while the dollar and other currencies are not backed by anything tangible, gold has an intrinsic value that will ensure it is never worthless.
“In addition to its intrinsic value, gold is able to provide investors with a strong hedge against currency depreciation, which is why it is always a good idea to have some percentage of a portfolio backed with gold,” said Phiri.
Yet with a rebound in the first few months of the current year, investors are now considering whether the precious metal still has further to run.
Mabyanine Phiri, an expert trader at ACM Gold, said that for the rest of 2014, gold is likely to run its course between $1 080 and $1 400, with more inclination on the bearish side.
“If we analyse the price charts of gold, it is clear that the yellow metal is going through a correction, which might end at around $1 100," said Phiri.
"The best way forward for investors is to trade the daily and weekly volatility of gold in order to make short-term profits. For those who are more interested in a long term physical investment, we would suggest waiting for incoming strong support levels at around the $1 050-$1 100-$1 180 range.”
Phiri said there are a number of technical and fundamental reasons to this analysis.
The monetary policies of the US Federal Reserve, along with the performance of the US economy are major determinants when trying to figure out trends in the movement of gold.
Dollar
Currently, the dollar is going through the "taper", which helps to boost its value, while all dollar denominated currencies and commodities, including gold, take a toll.
This follows the quantitative easing programmes, which were initiated to give the US economy a much needed boost.
“When policy makers felt that the US economy was back on track, they decided to start the tapering. This means that future economic data such as US employment figures will be crucial in determining whether the world’s biggest economy is really back on its feet," said Phiri.
"If that is the case, we will increasingly see investors turning to the dollar for investment purposes, which in turn will drive down the demand and price of Gold.”
Adding to this, is the physical demand mostly from emerging powerhouses such as China and India.
China’s demand for physical Gold is critical and has a strong impact on Gold prices, often helping to support the gold price and give it an intrinsic value that cannot be found in most financial instruments.
“We predict increasing demand for physical gold in 2014, although only to a certain extent, which should help to stabilise gold’s price. Even though we believe Gold has been over-valued due to its safe haven nature, we would not advise against investing in gold,” said Phiri.
He noted that, while the dollar and other currencies are not backed by anything tangible, gold has an intrinsic value that will ensure it is never worthless.
“In addition to its intrinsic value, gold is able to provide investors with a strong hedge against currency depreciation, which is why it is always a good idea to have some percentage of a portfolio backed with gold,” said Phiri.
