Gold was down again last week and while once more it was a relatively small slide, there’s definitely now a trend developing. It’s hard to say how long it will last, because global markets are still highly unsettled, but for now we’re seeing the spot price steadily slipping towards $1,100 and if the trend continues it will probably be through that mark by the end of this week. Last week’s movement was consistently down, with no rallies to be seen, and seemed to pick up speed slightly towards the end of the period; by close of trading on Friday gold sat at $1,132.80 an ounce, $30.10 down on its previous close. That’s a fall of close to three percent, definitely enough to make investors sit up and take notice.
Meanwhile it was a relatively good week on the equities markets, with the Dow Jones index climbing promisingly through Thursday before sliding back slightly to end the week almost 90 points up, and London’s FTSE 100 following a similar course to a more modest 25-point gain. The rise in US equities surprised some observers, because the exporting sector is still struggling with competitiveness thanks to the strong dollar. The dollar just got even stronger, as the embattled Euro slid more than three cents over the week. Greece has now passed the harsh budget cuts that were demanded as a precondition for a new round of bailout talks and the specter of Athens being ejected from the single currency has receded for now, but as many predicted that’s been bad news for the Euro. Many of the currency union’s wealthier members, especially Germany, have no appetite left for subsidizing their southern neighbors and would much sooner see the country return to the drachma. It’s clear that for the Euro to avoid future crises political union will be needed and there’s no popular support for that, so the currency isn’t likely to regain confidence any time soon. In the medium to long term that’s likely to hurt non-Eurozone exporters and put downward pressure on equities; this could be good news for gold. There’s also potential for a move from Euros to bullion as a safer investment, although right now FOREX is looking like a profitable sector.
Currency exchange might be attracting interest, but oil certainly isn’t. Both benchmark prices slipped again last week, with West Texas Intermediate down to $50.89 and Brent at $57.72. Production remains high, particularly in the Middle East where Saudi Arabia continues to use its low production costs to punish competitors. There’s nothing to suggest prices will recover until temperatures start to fall in a couple of months.
With prices heading slowly downwards for several weeks now this isn’t the ideal time to buy gold, but there are plenty reasons to believe the price will turn itself around in the near future. Our advice is to keep a close eye on the spot price and be ready to buy in quickly if it shows signs of rebounding. The $1,100 barrier is important here; if the price falls through that, it’s likely to slip further.
- Gold Market Update 7-10-2015
- Gold Market Update 7-26-2015