The popularity of gold as an investment has been widely reported by everyone from the Wall Street Journal to Fox Business News. Recently, however, a significant dip in the value of gold has had those same news agencies reporting that the popularity of this investment has come to an end. In fact, gold is experiencing normal market fluctuations, but few media outlets want to report the whole story.
Gold is one of the few investments that a person can make that is not affected by industrial cycles. While nearly every other commodity has a price that fluctuates based, at least in part, on the amount of demand it has from businesses, gold is almost immune to this. Because it has very few industrial applications, the value of gold isn’t subject to the normal rises and falls in the economy.
Many investors who are used to putting money into commodities that follow typical patterns, however, tend to panic when gold does not follow the same patterns. Of course, when gold is going up while their other investments are going down, they claim that this is because of their smart investing. Like any other investment, however, the price of gold will occasionally fall.
There are many reasons why gold goes through occasional price dips. Usually after it hits a record high mark, many large and professional investors chose to sell and take their profits. The most recent price dip has been blamed on this phenomenon. After selling a large quantity of gold, the market is temporarily flooded with extra product. The greater supply of gold causes the price of gold to fall until the commodity is sold.
Because so much gold is held by small firms and private investors, it is rare that gold crashes dramatically. Essentially, the fact that the commodity is held by so many different investors makes it next to invulnerable to a massive sell-off like the type that is frequently seen in stock and bond funds. While there may be fluctuations in price, typically gold tends to recover fairly quickly and in most cases its price will climb even higher than before the dip.