Gold Market Update 8-9-2015
Last week saw some nervous moments in the gold market as the spot price, already down over weekend trading, looked set to slip further early in the week. A dip to $1,080 at one point seemed to confirm these fears, but the outlook improved slightly on Wednesday and the price slowly began to climb again. By the time trading closed on Friday it was back up to $1,093.80, just $1.40 below its previous close. That’s an insignificant change, so for all practical purposes there’s been no movement at the weekly level. However there does seem to be some downward pressure still acting on gold, because otherwise we’d have expected it to rise quite strongly last week.
The usual rule of thumb is that gold rises when equities fall, and last week was a disappointing one for the US stock markets; the Dow Jones sank steadily, losing over 200 points Monday to Friday. One of the biggest pieces of financial news was a major downwards correction in Apple shares that’s seen the company’s value fall by $123 billion in two weeks – more than the annual GDP of Morocco. Future prospects are unclear, with Apple not revealing sales data on their Watch and the iPad market seemingly in decline.
The dollar also remains strong, particularly against the Euro, and that’s continuing to slow sales for US exporters. Meanwhile China continues to struggle, with various causes suggested. The Euro is also weak against the Yuan, chilling sales to one of China’s largest markets, and competition among exporters is holding prices – and revenue – down. Overall, despite gains on some indexes – the UK’s FTSE 100 had a fairly good week, after a shaky start – stocks performed poorly last week and that should have nudged gold demand upwards- FOREX looks attractive though, with cheap Euros a tempting buy in the expectation of a medium-term recovery.
Overall commodities didn’t do well last week; oil prices continued to slide, with Brent crude down almost 10% at $48.61 a barrel, and WTI at just $43.87. There’s no sign of a recovery in sight, and without one the entire US oil sector is likely to feel the pinch sooner or later; at this sort of price extraction costs are leaving a slim to non-existent margin, a problem the Persian Gulf producers don’t have. Continued weak oil is good for gold but right now doesn’t seem to be having much of an effect.
So the gold market is still looking generally uncertain right now. Going back to the 30-day figures there hasn’t actually been a lot of movement since mid-July, with the more dramatic falls more or less balanced out by steady rises in between. It looks like we’re just waiting for the price to decide which direction to break in. Pessimists still believe we’ll see gold at $700 by the end of this year but the fact is there’s absolutely no reason for that to happen. For now we don’t see it dropping below $1,000. If you’re looking at the longer term the current price is a tempting opportunity to build up stocks.
