Alphaville Gold prices may fall below the historical average?...

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Gold prices may fall below the historical average?Analysis FT Alphaville

Analysis of the Marketsof Federica Agostini - 28 Jun, 2013 - 12:48

Authoritative financial blog of the Financial Times, FT Alphaville , we translate this interesting analysis of IzabellaKaminska on the price of gold.

The precious metal has reached its lowest level in three years and has broken down the important threshold of $ 1,200 . Itseems that gold has embarked on a long-term downward trend, but this decrease far they can push prices? The

historical average can be considered a valid support?

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How far can the gold price go down?

On Thursday, gold fell below the psychological threshold of $ 1,200 per ounce:

This has prompted a good deal of investors to be excited for a quick achievement of the prices to the lowest point,

implying a potential immediately after ascent.

But speaking of minimum prices, the discussion on the lowest price that the yellow metal may reach is complicated

somewhat. Campbell Harvey , Duke University, for example, believes that in real terms the price of gold has beenoverrated for a long time.

Therefore, based on the fact that gold is considered as a safe haven against inflation, its current value should be about ... $800 per ounce .

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However, since gold is not so much related to inflation, it is difficult to determine whether this evaluation will be to get the

better of price performance.

In fact, according to Harvey, the correlation between gold and the trend in real yields suggests that the outperformance of

the precious metal is to be more like a trading dictated by fear :

Looking at the chart "golden gate" (or my graphics that use historical data 300 years old), you will notice that

a reversal in prices does not imply a return to the historical average, nor the permanence of the prices in that

area. Historically, prices have fallen below the average. We see, for example, in the analysis Shiller PE.

It will be good to keep in mind, then: the average historical price of gold may not be a good reference point forconsideration of future declines in the precious metal .

On the other hand, this is not the only analysis that provides for the fall in gold prices below the historical average .

From FT Alphaville : How low can gold go?

FT Alphaville Analysis GOLD Gold (XAUUSD) Financial Times

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