A normal business cycle has phases like expansion, crest, contraction, recession, trough, and recovery…expansion and so on. Gold remained one such destination of investors which they expected would not come down again at least in their life, but things happened and gold prices crashed. Here we would like to examine in brief why gold crashed and what would happen to the prices in future. But before that, look at the impact Nepali gold market is showing up. Gold is cheap and shops are closed, had the prices increased, shops would have come up with luring advertisements. Our concern is genuine to get to know how long this situation persists.

Gold prices recently was about to enter a death cross, it plunged by 13 percent since April 2013 in two sessions. Why? The real interest rates in the markets of developed economies were one of the reasons. Though gold is safe haven for investment, it gains importance usually when the market rates are either falling or at a low level. The fear of the public concerning the gold market helped the gold prices go down further. It is an unquestionable human psychology that people try to reserve things only when economic activities are lower. When the news were widely circulated that the economies are recovering and the market is comparatively stable, people were not ready to buy gold as they noticed no danger ahead, a fear that they would buy gold now and prices would fall down was always there. J P Morgan’s Index is very popular to reveal the inflation status in countries and gives an interesting result: higher the index value, gold prices are higher and vice versa and the index value was lower when gold prices crashed.

People believed that gold prices will never betray them but one has to understand that when gold prices have already crashed before, they can crash down again. It is a normal cycle and follows the phases discussed earlier. People had high anticipations that gold prices will go much higher but because the level did not reach, the investors’ perceptions changed and prices came down followed by the scandals of gold price manipulations by the key investors. Now, the gold price is showing a glimpse of hope, the major reason being the increased demand for the physical delivery of gold. The requirements are usually for coins and jewelries in USA, China and India and the increment is almost around 1 percent.

But banks in Europe are expected to narrow down their gold reserves which may make gold prices public-friendly, but then will the shops open? Government has to think about policies for the easy circulation of gold when prices become feasible for a huge public mass.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.