February 1st Weekly Gold Market Update
There was some nervousness in the gold market last week as, after an initial climb on Monday, the spot price then dropped back sharply until it brushed $1,260 on Thursday. Friday’s trading saw it recover most of the ground it had lost, however, with the final price standing at $1,283.10. That’s $11 down on the previous week, a slight disappointment, but it probably isn’t anything to get too worried about just yet. Gold ended the week climbing strongly and there’s no reason for that not to continue.
Looking at the rest of the market, US equities had another bad week. The Dow Jones fell consistently apart from a brief spike on Thursday, finishing more than 500 points down on the previous week. Gold’s Friday rally coincided neatly with the Dow resuming its fall, suggesting that whatever happens to gold this week is likely to be closely ties to stock values. Taking a broader picture the year-long trend of rising share prices now definitely looks to have ended. It might pick up again in the next few weeks but what we’re now seeing isn’t just one of the brief dips that began last August – the Dow has now switched to a slight downward trend. That’s likely to add support for gold as money starts to move towards commodities.
Gold does have a rival in the commodity sector right now – oil’s back. WTI and Brent both climbed last week, picking up some extra momentum as equities slipped. WTI ended the week at $48.24 while Brent reached $52.99. Both prices are still well under half their peak but the fall seemed to tail off about two weeks ago and they’re definitely heading up. That suggests the worst-case predictions – the $20 oil talked up by Saudi Arabia – probably aren’t going to happen. Oil that cheap is good news for consumers at the gas pump but bad news for the US oil sector and for the nation’s energy independence. Saudi Arabia can make a profit at $20 a barrel but US-based operations can’t. Any further fall would have had a serious impact on the industry, so while we can expect the Dow to fall slightly further thanks to more expensive fuel this is good news overall – but it is likely to cool the gold market a bit.
Overall there’s a lot to be optimistic about. Falling equities usually means rising gold, and that looks to be where we’re heading right now. If gold makes up its lost ground this week it will be heading for a six-month high, and that would be a clear sign that it’s broken free of last year’s lethargy and headed for a more sensible price.
Rising gold means buy, so we have no hesitation in recommending you pick up some while it’s still relatively cheap. If the Dow stays negative for more than a week or two gold could see some significant growth, meaning an excellent opportunity for short-term profits. After six months of falling prices and false starts that’s not something you want to miss.
