January 11th Weekly Gold Market Update
A lot of investors have been holding their breath to see how gold performed in the first full week of 2015, and now the numbers have been crunched they can let it out with a smile. The spot price fell in the last days of 2014 but started the New Year climbing, and that trend continued through last week. From $1,189.80 at the end of trading on January 2 it rose past $1,220 last Tuesday, dropped back to a fraction below the $1,200 mark by Thursday then took off again to close the week at $1,223.40. That’s a gain of $33.60 over the week, or a touch under 3 percent. It’s not a spectacular increase but it’s heading in the right direction again, and after a turbulent month gold is just $9 below where it was in early December – and nearly $60 above what it was selling for two weeks ago.
It looks like the traditional relationship between gold and share prices may be re-establishing itself; the two markets spent almost the whole week moving in opposite directions. Overall the Dow Jones finished 237 points up over the week thanks to extremely strong growth Wednesday and Thursday, but whenever equities dipped gold climbed. Currently the trend in the Dow is still upwards, but dips look to be becoming sharper and more frequent. It’s possible that investors are starting to get jittery about the medium-term prospects for stocks, and that’s not too surprising. The European economy is in trouble and even in the UK, which has the continent’s fastest growth, the FTSE 100 had its worst start to the year since 2008. Low energy prices could kick-start renewed growth in northern Europe but the debt issues in the Mediterranean fringe could be terminal. As Europe is the USA’s largest export market there’s a real risk of a knock-on effect on US equities, and gold is well placed to benefit from that.
As far as energy goes, there are some signs that oil prices may have hit bottom. West Texas crude is now at $48.36 a barrel and Brent at $50.11, but while both prices are still falling the descent rate slowed considerably this week. It’s too late to prevent some serious pain for US drilling companies, who loaded up on debt while prices are high, and that’s likely to depress stocks as the impact filters through the industry. Fracking has slowed recently as it becomes uneconomical at current prices and reduced supply means higher prices. Again that will cool down equities as manufacturing and transport costs rise.
It’s still much too early to say if the volatile gold market of the last few months is starting to return to normal, but a slow upward trend does seem to have been developing since early November and becomes more visible when longer-term data are examined. There are still some analysts predicting $1,000 gold this year but that doesn’t seem likely right now. There’s a good chance that the metal is ready to climb, so if you haven’t already taken advantage of the current low prices this is the time to do it.
