Is a good opportunity to buy if gold prices drop sharply

According to Kitco, gold's 8-week consecutive increase streak has ended. Gold prices will fall more than 3% this week.

Despite this being gold's biggest week of decline since the US election in November, experts are still optimistic about the long-term outlook for this precious metal. The price adjustment is not surprising, as many analysts have previously warned that the market is too hot and need a correction.

Since the beginning of the year, the bidding for gold futures has skyrocketed. Data from the US Commodity Exchange (CSTC) shows that gold's net buying position reached more than 200,000 contracts at the end of January - the highest level in nearly 3 years. Since then, traders have been taking profits on the upward trend, causing selling pressure to increase.

If selling pressure continues to increase, gold could retreat to an important support level of $2,800/ounce. However, despite the short-term risks, the long-term uptrend of gold is still solid.

In addition to speculative fluctuations, investment demand for gold is increasing, according to Neils Christensen - an analyst at Kitco News.

Last week, data from the World Gold Council showed that 48 tons of gold (worth $4.6 billion) flowed into gold ETFs in North America, marking the largest weekly increase since April 2020.

Looking to the future, experts predict that investment demand for gold in the West will continue to increase as the economy faces many uncertainties. In recent weeks, consumer confidence has fallen to a multi-year low, while concerns about inflation have increased.

These concerns are further reinforced by disappointing economic data. On Friday, the first quarter GDP forecast model of the US Federal Reserve (FED) Atlanta branch showed that the economy could decline by 1.5% this quarter, down sharply from the 2.3% increase forecast last week - one of the strongest declines in the history of this index.

Experts say that the situation of inflationary stagnation (a state of slow economic growth or recession while having high inflation) is an ideal environment for gold to promote its role as a safe-haven asset. In addition, high inflation will reduce real yields, thereby reducing the opportunity cost of holding gold - a non-interest-bearing asset.

Major investment groups, including WisdomTree and Goldman Sachs, still maintain the view that despite possible short-term downside corrections, gold could still reach the $3,000/ounce mark this year.

Another sign of investor sentiment is a report from BMO Capital Markets showing that gold and copper were the two most popular commodities at the mining conference organized by the bank. Meanwhile, silver is only in third place with a much lower level of interest.

"Although gold still faces downside risks in the short term, it is important to focus on the long-term outlook." - Neils Christensen commented.