August 13th Weekly Gold Market Update
If tracking the gold market wasn’t our job we’d be seriously tempted to give up at this point. After sliding for most of last week the spot price seemed set to continue that when the markets opened on Monday, then made a surprise turnaround and regained all it had lost over the last ten days. It peaked on Thursday at $1,310.80 then fell back slightly to close out the week at $1,308.90. That’s right back into the same territory it occupied all through July, and $15.30 up on where it closed last week.
Looking around the broader markets it’s not hard to pick up some clues about why gold has managed to bounce back a bit. After a long, steady climb the Dow Jones Industrial Average abruptly dropped 500 points last week, shaking confidence in the economic recovery. This week equities have seen very mixed performance, with the Dow dropping over a hundred points more by Thursday then climbing back to more or less where it started the week. That’s nowhere near as bad as last week but still enough to raise doubts about the short to medium term performance of stocks, and that traditionally benefits precious metal prices. If the stock markets stay unstable that will open the door for gold to start climbing again.
At the same time the pressure from oil may be reducing slightly. Although Russia is facing increased sanctions after the Malaysian Airlines shootdown the situation in Ukraine hasn’t flared up again since. There’s also increasing resistance to the ISIS extremists in Iraq, especially in the oil-rich Iraqi Kurdistan region, and US air strikes are likely to have a serious impact on their ability to expand further. The threat to the Middle East oil supplies is receding and that’s having an effect on prices; crude oil is still below the $100 a barrel mark and shows no sign of rising significantly as yet, so it isn’t likely to tempt as many investors away from gold.
The big question, then, is what’s likely to happen next week. There won’t be any major economic news until the latest nonfarm payroll figures are released at the end of the month, so investors will be watching the stock market for clues. If the Dow Jones doesn’t manage to resume its rise that will feed worries that the recovery has stalled, and that can only be good news for anyone who’s holding gold. Right now the key figure seems to be $1,310; the spot price is having difficulty breaking through that. Some analysts think it will need to drop first before rising any higher but the pause in stocks could change things. Another week or so like the last two could easily send gold through that ceiling and we wouldn’t be at all surprised to see it pass $1,330 by the end of the month.
One thing’s for sure; this is not the time to be selling your gold, and if the Dow doesn’t recover you might do very well to buy as much as you can while the price is right. With equities uncertain it’s likely to go higher.
