Some of us may be getting a bit panicky with the slight downward trend of gold price after its strong bull run. Many fear an end to the current bull run but a proper perspective of the recent drop is needed.
Gold is very volatile by nature which can be below 1-standard deviation in any month where the average volatility was at 4.9% in the last decade. Gold must be viewed as a medium to long term investment rather than a short term investment.
Market fundamentals point to a continuous upward motion for gold in the following year. More buyers flooded January which is usually very quiet after the Christmas season, which implies that many are viewing a buying opportunity at this moment.

The UK economy has declined this year as its residents feel the tax hikes and cuts in spending in an attempt to control the national debt that is currently spiralling downwards at £1trillion and not reaching the bottom as yet despite many austerity measures being implemented.
Last year end, Bank of England cut UK growth forecasts to 2.5% from 3.5% for 2011 with an implied consistently high inflation until 2012. December inflation figures have indeed spiked from 3.3% to 3.7% which is high above even that of Zimbabwe’s. However, the RPI is at 4.8% with real inflation standing at 6.46%; official inflation indices are usually adjusted to present a lower real inflation report by successive governments.
At the same time, youth unemployment figures spiked to its record high with total unemployment at 2.5 million which implies the failure of the private sector in creating sufficient jobs to cater to the public sector needs.

The Q4 2010 GDP values show a reversal of the UK economy which implies an official recession if this trend continues, realising our worst fears of ‘double dip’. This is in the midst of the existing European Sovereign debt issues of last year. Perhaps a re-emergence of bailout from Ireland, Spain and Portugal may provide a plausible solution.

This year continued with last year’s political unrests and terror threats at the global plane. There is an increase in global political instability with Africa and Middle East areas. Nevertheless, the basic fundamentals driving gold to higher returns in the past ten years are still in place. But the political and economical problems will still persist.

A price correction may happen soon which can be viewed as a purchase opportunity as gold is viewed positively as investment insurance and wealth in these difficult times.

If you want to buy & sell UK gold sovereign coins from a reputable gold dealer? Physical Gold offer clients to select the best value Gold Sovereigns to buy, provide live Gold Sovereign prices and explain how Sovereign coins can be combined with other gold coins to form a balanced tax free investment.

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