It’s been yet another poor week for gold, although in the general financial chaos that’s not too much of a surprise. Values have been swinging right across the market as the global economy took a minor stumble, and gold looks to have been pulled down along with almost everything else. The spot price had risen slightly over weekend trading but as soon as markets opened on Monday it headed down, bottoming out on Thursday around $1,166. Friday saw a slight rise and it finally closed at $1,168.30, down $5.90 on the previous period. That’s not a serious loss, well below 1 percent, so we’re actually not too disturbed about it. Looking at the overall situation it would have been hard to expect much different.
Looking at the equities markets first, it seems likely that a lot of money has been pulled from gold into US stocks. The Dow Jones rose through the first half of the week, slowly at first then more strongly on Tuesday and Wednesday. It dipped back on Thursday but still turned in a healthy performance. That’s probably down to Greece’s default to the IMF and the collapse of talks on the struggling country’s debt issues. It’s now looking very likely that Greece will be expelled from the Eurozone and the consequences of that are hard to predict, but it’s possible the Euro will rise sharply. It could also fall – it’s supposed to be a permanent currency union, and a founder member’s ejection could shake confidence – but a lot of analysts think getting rid of Greece and its chronic overspending habits could actually strengthen the currency. A strong Euro means a relatively weaker dollar, and that’s great news for US exporters. It’s all happening fast now and by the end of this week there should be some clarity. If Greece stays in, or exits but the Euro falls anyway, expect to see a rapid move out of American equities. That move could head towards gold, but be wary – European stocks, including London’s FTSE 100, fell last week. A recovery there would be a very attractive option for anyone looking at short-term gains, and that could leave gold standing.
Obviously foreign currency has a lot of potential at the moment, too. The Euro lost some ground last week and is still within a couple of cents of the lowest it’s been in several years. If you think it’s going to rise this week or next, buying up cheap Euros now is very tempting – they can be sold back for dollars after Greece crashes out. If you’re less sure about how things will go, however, gold might be a better bet.
The key to all this is uncertainty. The EU is confident it’s tightened its lending processes enough that a Greek collapse won’t spill over into the rest of the continent, but even if that’s the case there will still be an impact. The Eurozone is the world’s largest market and what happens there has a major impact on global trade. Uncertainty is worrying, and that could push money towards a traditional safe haven like gold.
- Gold Market Update 6-26-2015
- Gold Market Update 7-10-2015