The western world investors see the gold price falling, while in the East and the Middle East, they see gold prices are rising. They are both right.
On the short term, gold price is falling like a rock. And on the long term, gold price are making continues to rise as it has always been for centuries.
The Reasons of the West:
- The 12-years bull run ended, and now it’s the time for the bears to be in charge.
- The stock markets outperform the gold market, making a better choice of investment and a direct reason for capital migration.
- The weight of the USD reached a 5-year high against commodities and currency baskets.
- Inflation rates decreasing by 4% this year, according to JP Morgan report.
The Reasons of the East:
- The gap between the low supply and high demand.
- The world political instability and financial crisis.
- The low interest rates since the beginning of the 2000s recession.
- The increase of retail investor’s income.
- Emerging economies central banks buying more gold.
- The U.S. QE policy and the currency wars.
- Speculation volumes increased in the past years.
- The faith in gold increasing over faith in fiat currencies.
Western investors are reading the charts right, by they miss the big picture. They are factual about the difference between the physical gold market and the paper market. But that is true for the short term and it requires great faith from investors in governments and monetary system, which is not the case right now.
Eastern investors look at the boarder frame, and their idea of long term is way longer than the western view. Their view might lack solid evidence unlike the western view, but no one can help to feel they are right. It seems they read between the lines, and understand the global markets better.
This might be the struggle between the bulls and the bears. While I lean towards the bulls and the eastern view, the western views and reasons for the current dip in the gold price can’t be ignored. The smart investor would reconsider his views and goals. That would be a perfect time, as new winds are amassing on the horizon.