Gold Breaks $1,400 | Assumptions Or Imminent Reality?

Lately, there’s been quite the discussion surrounding gold, and for good reason. The price of the commodity has seen incredibly dramatic gains this year. Between the Chinese economic uncertainty, European economic hardships, and now the Brexit, safe haven investors have been all over gold! Lately, I’ve seen several experts writing articles that say that gold is likely to continue growing. In fact, one of the lower estimates is that the price of the precious metal will reach $1,400 per ounce. However, is this estimate based on blind assumptions or fundamental data that shows that it’s an imminent reality? Today, I’ll do my best to answer that question.

Understanding What Causes Movement In The Price Of Gold

Before we get into whether or not gold is likely to grow to $1,400 per ounce, it’s important that we understand what causes movement in the price of the commodity. Gold, like any other commodity is highly dependent on two major factors, supply and demand. However, because it is also considered to be a safe haven investment, there’s a bit more complexity in determining price movements.

Because gold is a safe haven investment, investors tend to flock toward the commodity when economic, currency, and market conditions are concerning. As a result, when something goes wrong in terms of the economy or the global market, the demand for gold skyrockets. Leading to gains in the value of the precious metal.

We’ve seen several examples of this trend throughout history. Most recently, the price of gold climbed to more than $1,837 per ounce in the years following the 2008 and 2009 global economic recession. As the values of currencies fell, the market became uncertain, and jobs were at a standstill, investors were buying gold to protect their financial assets.

Is Gold Reaching $1,400 A Realistic Idea?

Knowing what causes price movement in gold, it seems clear that the precious metal will likely pass the $1,400 per ounce mark. In fact, the drastic gains we’re seeing in the price of gold were expected. On both the supply side and the demand side, we’re seeing fundamental support. Here’s what’s going on…

• Supply – First and foremost, gold reached peak supply early this year. This means that some of he world’s largest gold producers believe that they will see declines in production moving forward. In fact, gold production is expected to fall as much as 3% this year. Naturally, this supports growth in the price of the precious metal.
• Demand – Demand is another big factor, and once again, it is pointing to supported growth in the price of gold. As mentioned above, gold is a safe haven investment. This year hasn’t been a great year for the global market, nor the global economy. At the moment, there are several major economies on the brink of economic disaster. Now, with the UK vote to exit the EU, markets are becoming even more volatile. As a result, we’re seeing massive gains in the safe haven demand for gold.

Considering the fundamental data surrounding gold, it’s likely that we’re going to see further growth in the price of the commodity for some time to come. In the past week, the value of gold has climbed by more than $27 per ounce, and it’s now trading less than $60 from the $1,400 mark. Considering the fundamental data and current trends, it would be absurd to think that gold passing $1,400 per ounce isn’t likely.

What Do You Think?