Would It Be Better To Invest In Gold These Days?

Many people ask us whether or not it is worthwhile to have the gold asset in your portfolio and, in fact, this doubt arises spontaneously to many, given the continuous decline of gold on the market. In fact, all this is mainly justified by the fact that gold is expressed in a currency (specifically, the international reference is the dollar) and the “nominalized” value of gold is certainly a function of the relative strengthening or weakening of the currency. But these are very simple and intuitive things to think about.

Having said that, we will dwell on the forecasts for the underlying.

Gold Also Has An Institutional Function

The same forecasting logic cannot be applied to gold as to the other underlying assets. Market laws apply, but to a certain extent.

Gold is requested by the “big players” (the individual states) to contribute to the stability of the exchange rate, at a certain strength threshold. It is a magnet system, often misunderstood with the gold standard.

It has often been said: it is as if we were back to the gold standard, but if so, there should be specific operating rules for individual retail banks.

What does this magnet system involve? A mechanism, based on “collateral guarantees”. The more the gold stock is, the more it is necessary to maintain a certain proportionality in terms of foreign currency.

How can an individual state affect the appreciation or depreciation of a currency, if domestic (in the case of the euro, the ECB, as well as the group of states)? Asking or offering foreign currency, against national currency. If you ask for a domestic currency (you give up a foreign currency), or other factors alike, the currency in question will be appreciated in relative terms. Gold is the collateral to the volume of foreign currencies that a central bank has in its reserves in order to be able to intervene in the foreign exchange market.

That said, a distinction must be made between

  • when gold is requested for market purposes (jewellery, voluptuous consumption)
  • when gold is required to fulfil an institutional role. Much is being said about the Swiss referendum this month, assuming that this will result in a rise and a rapid recovery of gold prices, against the dollar. It is not believed that this is so obvious.

A trajectory certainly far from the highs of 3-4 years ago, when gold had reached 1,800 but this can be justified also considering the strong incidence of the institutional component.

For the trading is an interesting opportunity, as long as you know how to choose with knowledge and discernment the right point of entry and exit from the market, most likely orienting on a medium/long-term expiry, but always within a few minutes (a time frame to 5 minutes or so is ideal). Why not a 30-60 seconds? The market swings and the continuous rebounds of return, among other things difficult to predict on the “technical” level, leave breathless a fast trading that still needs not only volatility but also certainties in relation to directionality, so as to position itself in critical levels and reasonably safe. Swings are very short, more than usual, in order to make an option at 30 or 60 seconds less risky.

For CFD investment, a bearish position is recommended. If you have not already caught the short signal around 1,160, be ready to take advantage of a possible downward trend in prices during the last week of November. But of course it all depends on how well the dollar holds up and how right those who say that there will be an increase in prices are. Many analysts have already believed that they will find bullish candles for gold. For the rest, we recommend that you stay and observe the market, leaving a small “bell” on as soon as the prices show that interesting dynamic that makes us enter the market quickly to shorten positions.

What reported is not an indication to investment.

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