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Source: kitco.com Recently more people, including the investment illiterate, consider gold as their investment or personal hedging solution against inflation. This phenomenon was natural considering the growth of the price of gold is roughly about 300% for the last five years, give or take, makes the 6-7% annually interest pay for deposit account grow unpopular. Even 2008 crisis has no significant effect whatsoever on the long term trend. This phenomenon can also be seen from the new gold-based investment products offered by financial institution to retail market, especially sharia ones. The gold euphoria was also seen about a month ago when there was a terrifying queue line in ANTAM for gold purchase, that has successfully made the gold price even higher. Nevertheless, many are still in doubt of the potential growth of gold. We could challange the doubt using academically approved technique such as forecasting or moving average analysis.
Source: Kitco.com Statistically speaking, there are two type of commonly used forecasting, historical analysis (time series) and driver analysis. Using historical analysis, we can predict that the price of gold will still be showing an increasing curve for a long time period, even though a short time rollercoaster ride is still likely to happen. The driver analysis can be used to predict the fluctuation of the price based on the event that most likely to affect the price. In this case, as long as the world economy is still reluctant to go back to the old gold-based reserve currency system, it is safe to say that the ever-increasing trend is still happening. The simple moving average analysis also is showing the same result (you can easily get the historical data of gold price easily on the internet to conduct your own data-based analysis). Comparing the long term simple moving average with the short term one, we can technically conclude the trend will still be uprising in the long run when the short period is higher than the long one, both are woving upward, and the current market price is still above the moving average of the short term period. Nevertheless, other things such as U.S. government policies on their debt for example, can lower the price for a while as we could see a few months ago. The recently happened economic crises in Europe and U.S. indicate the terrifying default risk haunting every fiat money or bonds that we hold, not to mention inflation. If those conditions were considered likely to occur in the near future then it is suggested that we consider our investment and hedging instrument on real sector,say gold for example, for the long run. Simply said, if you hold real asset, when inflation is high your asset price would also rise. The same condition will likely to occur in the time of crisis.