March 14th Weekly Gold Market Update
Gold’s decline continued through most of last week, although at a slower pace than the week before. A steady fall over the first three days took the spot price to just below $1,155 by Thursday, and then it seemed to level out at that point. Friday saw a modest reverse and the final trades of the day went through at $1,158.60. That represents a total loss of $10.10 over its previous close, a disappointing performance. On the other hand it’s nowhere near as bad as the period before and the price at least ended Friday heading in the right direction, so it may have hit a hard floor. This week will definitely be watched with a lot of interest.
Interestingly this is the second week in a row we’ve seen gold fall in parallel with a decline in the Dow Jones index. The flagship US equities marker dropped sharply in the first half of the week, surged back up on Thursday then fell away again, finally closing 250 points below where it started on Monday. In the UK the FTSE 100 was also down, falling well below last week’s record high to register a 125-point drop over the week. The picture was slightly different in Europe, where the DAX, CAC 40 and Swiss indexes all showed small gains. That points the likely reason for the decline in US (and British) equities – the collapse of the Euro. The single currency is now below $1.05, its lowest value in twelve years. That’s a boost for European exporters like Germany, France and Switzerland, but for American companies trying to export to Europe it’s going to seriously reduce demand. As the Eurozone is one of the biggest markets in the world the effect on share prices is predictable, and that’s what we’re seeing. At the same time this degree of currency volatility makes FOREX an alluring prospect for investors, which seems to be having a chilling effect on commodities in general.
Meanwhile the crude oil market has taken another turn downwards, with both West Texas and Brent losing around $5 a barrel last week. WTI is currently selling for $44.84 and Brent for $54.67. The prices leveled out towards the end of the week so this latest slump might not continue, but it still makes oil less attractive to buyers. It seems the main reason for gold’s fall is the appeal of currency trading.
Yet again it’s hard to say what the immediate future will bring. A lot will depend on what happens this week; if gold has settled on hard support that will be a strong signal to buy and wait for the price to recover. Could it fall further? Yes, it could – right now all bets are off, and a further collapse in the Euro could be very unsettling to the global economy. The possibility of a Greek exit is also very much back on the cards as Germany’s patience runs out, and that’s likely to lead to either a rebound in the Euro or its complete disintegration. Either way there will be continued volatility in the gold price, with opportunities as well as risks for the bold investor.
