July 28th Weekly Gold Market Update
Gold got off to a confusing start this week, with the spot price rising when the markets opened to reach the week’s high of just over $1,370 then falling back to close the day at $1,313.70. From then on it was downhill most of the way to a couple of lows around the $1,250 mark on Thursday, before a small rally brought it back up to close at $1,303.10 on Friday afternoon. That’s slightly down from last week’s close at $1,309.20 and the second week in a row that the price hasn’t really gone anywhere despite some swings.
So what’s going on? It’s not easy to make sense of the gold market at this point. After a long run of slow progress against an unfavorable market it came as a surprise last week when the price suddenly stalled and fell back, and a lot of market analysts expected the slide to continue this week. That hasn’t happened; the price may be down a few dollars but it hasn’t moved out of the same general area in two weeks.
Last week it looked as if the continuing strong performance of the US economy was making stocks look more attractive. There’s definitely an element of truth in that, with the Dow Jones index trending steadily upwards since the start of the year and unemployment figures consistently showing new jobs being created since the beginning of the year. Although unease remains about the strength of the recovery there just isn’t the level of nervousness that would persuade investors to shift their funds to a traditional safe haven like gold. The US dollar is also gaining strength after bouncing along below €0.72 for a while, and a strong dollar is usually associated with downward pressure on precious metal prices.
The price of oil also affects other commodities, and if oil is rising demand for gold tends to fall off as investors move over in search of profits. Two of the three big international news stories right now – the insurrection in Iraq and the deepening crisis in Ukraine – are sending constant rumbles through the energy market and have the potential to send oil prices up sharply. So far that really hasn’t happened. There have been a few spikes as a short-term response to events but a barrel of crude costs nearly $3 less than it did at the start of the month. However the energy market could get nervous at any time and send that a lot higher, which would kick any support out from under gold.
It’s likely gold is entering a period of turmoil, with prices likely to fluctuate for the next few weeks at least. That’s always guaranteed to make investors nervous but in the long run gold is set to climb past $1,350 and possibly to $1,400. Any time the price dips to the $1,250 level is an opportunity to buy if you have the patience to hold on for a few months. There’s also potential for short-term gains if you’re willing to gamble, so although the long, slow price rise seems to be over for now it’s not time to sell off gold stocks just yet.
