August 4th Weekly Gold Market Update
At last the gold price seemed to find a clear direction this week, after a long period of uncertainty and fluctuations. Unfortunately that direction was down, with an initial jump when markets opened on Monday quickly reversing into a four-day fall. By Tuesday morning the spot price was below the $1,300 mark and it headed on down, bottoming out at $1,281.30 on Thursday morning. A rally on Friday saw it climb back up to close at $1,293.60, a fall of $9.70 on last week’s close.
Of course the question is, why? For a few weeks we’ve been wondering how gold has managed to hold its value with the stock market climbing so strongly. Now gold is falling at the same time as the Dow Jones index takes a 500-point hit. That does give hope that the slide on prices will be temporary – if stocks continue their fall many investors will start to take another look at gold as a safe refuge.
It’s possible the price could stabilize now anyway – Friday’s rally was sparked by the release of the latest nonfarm payroll figures, which yet again showed more than 200,000 new jobs created over the month but fell short of predictions for the first time this year. However many analysts remain pessimistic and expect a further fall once the effect of the employment figures wears off. Whether they’re right depends on other factors, and the expert opinion is that potential gold buyers are going to be paying more attention to the international situation over the coming weeks. As well as continuing trouble in the Middle East and tightening sanctions against Russia – including freezing the assets of many of its leading oil companies – there’s the threat of a meltdown in Argentina as the government defaults on its debt again. There are a few optimists however, and some of them expect gold to rise back to the $1,310 bracket next week after a continued fall in equities.
Looking away from the spot price towards gold coins, the U.S. mint reports that sales of Gold Eagle and Buffalo coins were down 45 percent in June, probably driven by the continuing high price. This week’s fall should boost demand both for coins and in the general gold retail sector. It won’t make a huge difference to the price of bullion coins because most of that is in the premium, but even a slight drop makes Eagles a more attractive investment.
What happens for gold over the next month is still an open question. Equities have lost most or all of the gains they’ve made this year, and in a very short time, so a flight of capital into the safety of metals is a definite possibility. If that happens a rise to $1,350 or even $1,400 isn’t out of the question. On the other hand a recovery of stocks and continued improvement in jobs and the dollar could push the price below $1,280, and if that happens a further fall is likely. If it drops below $1,250 for any length of time, sell.
