By all accounts, the price of gold should have gone up by now. All governments around the world have pumped in trillions of dollars to stabilise their economies which everybody suspects would lead to inflation and higher prices for gold. Besides, geopolitical factors are not all that favourable around the world from Iran to Pakistan to North Korea.
But, contrary to an expected sharp rally in gold prices, the yellow metal has actually dropped 2% since February 2009 and is currently trading around $940. Everybody is hoping that it would touch $1,000. But will gold go down before that fooling everybody? If it breaks $900, gold can go all the way down to $800 in the short term. Gold has a history of being extremely volatile.
Why is gold not going up, despite and array of top investors forecasting that it would? This is simply because gold is seen as a hedge against inflation but there is no sign of inflation anywhere. The world’s largest economies are in a deflationary environment. Consumer price index (CPI) has dropped 1.3% in the last year through May – the largest fall in the past 59 years. Therefore, the $1,000 mark will remain insurmountable for a while.