Last week we said gold’s steady downward progress was a worrying trend, so you can imagine we were pretty happy to see that trend stabilize over the past few days. The spot price started to pick up slightly in weekend trading, most likely because investors realized there was no real reason for it to be falling, and rose strongly when the markets opened Monday. That continued through Wednesday before falling back slightly but by the time the markets closed for the week it was stable again, and the final price was $1,181.30. That’s a rise of just $9, but what matters is that it is a rise, and the downwards trend seems to have stopped for the moment. The big question now is whether it will return this week or if gold will start to climb back to a more realistic level.
It’s hard to track the gold price against equities last week because the picture is far from clear. The Dow Jones moved in roughly the same direction as gold for the first three days, but continued climbing on Thursday when gold wobbled. However it then fell sharply the last two days of the week while gold steadied. The FTSE 100 showed a similar pattern, too, so the best guess is that up to Wednesday gold and stocks were both responding to some third factor, before returning to a more traditional relationship.
What could be affecting the wider economy? Equities got a boost on Wednesday and Thursday on rumors that a solution to the Greek debt crisis was in sight, but that turns out to have been a false dawn – in fact the IMF have now walked away from talks, saying they’re going nowhere. The EU are now openly talking about a Greek default and if that happens the country will probably leave the Euro. Currency markets have been busy all week, with the single currency seesawing against the dollar but averaging out at around $1.12. Markets are waiting for either Greek exit or a signed deal, and which one of those happens will decide which way the Euro breaks.
Meanwhile Morgan Stanley are predicting very strong second quarter US growth figures, reversing the year’s poor start. Wages are rising again and that’s likely to push the Fed into finally enacting their long-awaited interest rate rise. US investors are already pulling out of emerging markets as the end of cheap dollars approaches, and when the Fed acts that’s likely to spike the US currency dramatically. That’s going to be bad news for exporters but for non-dollar gold buyers it could see prices rise attractively.
Gold still isn’t facing much competition from oil, with crude prices slipping again. WTI is back below the $60 mark while Brent was at $63.87 a barrel on Friday. It looks like the future direction of the gold price is going to be decided by how it interacts with FOREX and equities. There’s a lot of uncertainty right now and the second half of the year could be extremely interesting, so take advantage of the current low price to maximize your stock of gold.
- Gold Market Update 6-8-2015
- Gold Market Update 6-20-2015