Gold investors have been warned that a correction in the price of the rampant precious metal could be on its way.
Pullback Could Happen
Gold soared to a best ever $3,500 an ounce today as investors continued to flock to it as a safe haven given the economic and political turmoil caused by President Donald Trump’s new administration.
The spot gold price has soared 27% so far this year with a host of analysts forecasting that it is likely to go even higher given continued uncertainty and volatility. Even, some say, as high as $4,000 an ounce.
But all those new Rumpelstiltskin fans out there have been warned that their gold weaving magic might soon begin to spin the other way.
In a note today Kathleen Brooks, research director at XTB, said that gold could be at risk of a short-term correction due to the ferocity of its recent increases.
“Although we think that some of the moves that we have seen in markets are the result of a strategic allocation shift, the 15% rise in gold in the past month is unsustainable, so a pullback from here would not be unexpected,” she said.
The Dire Dollar
Brooks didn’t say when this could happen or how big this correction would be but she doesn’t seem to expect it to happen while the decline in the U.S. dollar persists.
“The sharp rise in gold, the decline in the dollar and the jump in Treasury yields is causing existential angst among investors, which is inevitably weighing on equities and risk sentiment,” she said.
Also, note that she mentions a short-term correction in the gold price. Of course, some traders will be looking to make some profit as the price fluctuates but those more long-term minded investors spooked by the events of the last few months are unlikley to budge.
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