The dynamics we have witnessed are so strange that they require explanation. There are at least 2 reasons for the behavior of exchange traded funds:
– A Short-Term Drop In The Price Of Gold Is Expected
If a category of institutions has always sold gold when its price was falling, but suddenly stops doing so, with the most dramatic decline in recent years, it is clear that the decline is not expected to last long. In hindsight, we know that’s exactly what happened. A month apart, the price of gold rose again and crossed the psychological limit of $1,800 per ounce;
– Etfs Continue To See Gold As A Good Investment Despite Its Falling Price
The sharp decline of more than 7% in just one month might seem like a “total collapse” for gold. It’s not necessary. The precious metal continues to be seen as a savior of purchasing power.
This is true not only for exchange-traded funds, but also for central banks, the other major category of institutional investors in gold. In June, central banks around the world continued to buy gold. The actions of financial institutions and ETFs clearly show that investing in this precious metal is safe and profitable.
As in life, in the world of investing, facts speak louder than words. They tell the story of the stability of gold and the instability of fiat money . Short-term volatility in the precious metal caused by unfounded optimism in the markets has led to good returns for institutional investors.
There is no other way when the fundamental behind the price of gold remains stable. The solidity is due to the actions of central bankers, who send inflation to unprecedented levels and suppress interest rates. As they have no prospect of changing any time soon, the price of gold will receive guaranteed support.
In the title, I used the phrase “ideal time” because in the current economic climate, such price drops represent a very good opportunity to invest in gold. The actions of institutions, turning their backs on traditional dynamics, prove it. That is why it is important to monitor their actions and see where they direct their money, especially when we are talking about unprecedented phenomena, such as the purchase of gold by exchange-traded funds.