August 18th Weekly Gold Market Update
The gold spot price has had a busy week, but a pointless one – it hasn’t really gone anywhere. After slowly climbing to a high of $1,316.88 on Thursday afternoon it suddenly dropped a full $20 after lunch on Friday, before a late regain brought it back up to close at $1,304.40. Overall it lost $4.50 in this period, adding up to no real movement at all. In fact the price is within cents of where it was in mid-July. With all that’s been going on in other markets and in the news that’s pretty remarkable.
One reason the gold price might be stagnating is that the Dow Jones Industrial Average, which took a big tumble two weeks ago, seems to be picking up a little ground again. It’s still nowhere near its high of three weeks ago but it did manage to climb for most of the week. That was probably enough to dent gold’s attractiveness slightly. Equities prices need to be watched closely over the next few days though. Both US and European markets dipped late on Friday at the latest news from Ukraine. The Kiev government claims to have used artillery to destroy part of a Russian convoy, and if that turns out to be true it brings the countries very close to war. That would hit stocks hard, and at the first hint of Russian retaliation – which could be overwhelming – markets are likely to tumble. That could be exactly the nudge it takes to push gold back onto an upward track.
The other big driver of commodity prices is energy, and while it looked like oil prices might be set to rise sharply that doesn’t seem to be happening. In fact a barrel of crude is well below where it was trading this time last year and is nearly $8 down on mid-July. The growing response to the Islamic State terrorists in Iraq looks to be calming fears of a supply crisis in the Middle East oilfields and that’s good news for gold.
So far this year gold has had trouble breaking through the $1,320 mark. If it does manage to climb through that there’s likely to be a much harder ceiling at $1,350, but a major fall in stock markets could give it the momentum to pass that as well. If so there’s likely to be nothing to stop it before $1,400. On the other hand if it falls back again there looks to be a lot of support around the $1,280 mark, so if it ends up around that level it would be a good time to buy.
Any instability is likely to turn investors’ thoughts to selling, but we don’t advise that right now. The way the markets are looking doesn’t point to gold dropping below the floor at $1,280, and unless that changes it’s still definitely worth hanging on to what you have. Right now we’re watching the Dow and FTSE 100 for any sign of movement. If they keep going up we might revisit the idea of selling gold, but at the moment we don’t see any reason to go down that road.
