March 21st Weekly Gold Market Update
We’d been expecting – and definitely hoping – to see gold recover last week, and happily we weren’t disappointed. The recovery certainly wasn’t a spectacular one but any upward movement would have been welcome and that’s definitely what we saw. After an initial and worrying dip when the markets opened Monday the spot price abruptly changed direction and climbed steadily the rest of the week. By the time trading ended on Friday gold was selling for $1,182.40 an ounce, an increase of $23.80 over the previous week’s close. That makes up all it lost the second week in March and more, which is encouraging.
Over the last few weeks we saw the gold price fall while equities went down as well, in a break from the usual pattern. This week that break continued, but in the opposite direction – as gold rose the Dow Jones average rose, too. In fact the two looked very much like one was tracking the other or they were being driven by the same external factor; the Dow fell on Monday along with gold then turned round and headed up again. On Thursday it fell back slightly and while gold managed a profit on that day its rise was a lot slower than Wednesday or Friday. Meanwhile in the UK the FTSE 100 also followed pretty much the same track as gold through the week, minus the dip on Monday – it managed a small rise that day, too. This is definitely unusual, because generally precious metals move in the opposite direction to the major stock markets. The best guess right now is that both are being affected by the current opportunities available in the foreign exchange sector, where the Euro is still taking a battering. The single currency was a couple of cents up last week – it ended the week a fraction above $1.08 – but the best that can be said for that is it isn’t quite as bad as the week before. Still, it’s heading up at the moment, and that’s good news for US exporters who don’t want to see their goods priced out of the Eurozone by a strong dollar.
Gold certainly isn’t facing much competition from oil at the moment. West Texas Intermediate seems stuck firmly between $40 and $50 a barrel and is fluctuating wildly in that range. There are profits to be made there for a daring investor but it isn’t a market for the cautious. Brent is also moving in a narrow range about $10 above WTI.
Overall the outlook for gold is still highly volatile and it’s difficult to make long-term predictions. The prospect of continued currency swings could cut both ways. For investors in the Eurozone it’s a potential safe haven if the Euro weakens further or even starts to break up, and thanks to the ongoing issues with Greece that’s not a prospect that can be ruled out. On the other hand short-term traders are going to see a lot more potential in currency speculation. Right now we expect to see a slow and sometimes hesitant recovery for gold over the next few weeks.
