Following its slide the week before, a lot of anxious investors were keeping a close eye on the gold spot price last week in anticipation of another sharp fall. As it turned out there was room for relief all round; we certainly didn’t see a recovery in the metal but no further serious decline either. The price slipped a few dollars over the weekend but, when the markets opened Monday, actually began a slow but steady climb. There was a setback on Wednesday when it abruptly dipped to a few cents above $1,080, but by the time trading finished Friday afternoon it had climbed back to $1,095.20. That’s still a slight fall over its previous close, but at $4.30 it isn’t a serious concern. Looking at the rest of the market there are some reasons to hope the price has bottomed out for now and could rise through the month.
Last week was a generally good one for the equities sector, with both the Dow Jones Industrial Average and the FTSE 100 rising strongly through Wednesday. At that point the Dow levelled off, then sank back slightly on Friday, while the FTSE continued up. Still, both indexes posted decent gains over the week and we’d have expected that to show as a fall in gold. In fact gold also managed to rise slightly through Wednesday, suggesting a general market bounce. If equities hadn’t looked so healthy we might have seen a real recovery for gold. It’s worth keeping an eye on the Chinese exchanges, because confidence seems to be sagging there as poor manufacturing figures continue to trickle out. Chinese equities have already seen some serious losses this year and a continued decline could fuel gold demand locally. A slowdown in UK exports is also a real possibility thanks to the continued strength of the pound, and while the economy isn’t as export-based as China’s that will still impact the FTSE. Even US manufacturing stocks are at risk, because despite the Greek debt crisis receding for now there’s still no sign of the Euro beginning a recovery, and the dollar remains strong.
Meanwhile oil continues to struggle; Brent crude is currently sitting at just over $52 a barrel and WTI is at $47.12. After a small rally that lasted from April to July oil now seems to be heading down again, which is going to impact the US extraction and equipment industries as well as making it very unattractive as a commodity investment. Without a major cut in production there’s no sign of prices rising any time soon and the Middle Eastern producers seem happy to keep output high.
So it’s definitely a confusing picture for gold at the moment, but we were happy to see the price stay relatively stable last week. Another big fall would have severely dented confidence and probably triggered a slide to at least $1,000 an ounce and possibly as low as $900. As it is, there’s a good chance of a recovery this week – so be ready to buy if the price takes off.
- Gold Market Update 7-26-2015
- Gold Market Update 8-9-2015