Observers were hoping to see gold’s recovery continue last week, and they weren’t disappointed. The spot price started rising as soon as the markets opened Monday and headed up for most of the week. It peaked at just over $1,200 on Thursday before slipping back slightly on Friday, finally closing at $1,198.40. That’s a smaller gain than the week before, at $16, but it’s still heading the way we want it to be. Despite Friday’s dip there’s no reason why we shouldn’t see another improvement this week, with the price getting back into safer ground around the $1,225 mark.
Last week’s rise for gold also marked a return to a more familiar pattern of connections with other markets. Equities dropped across the board through most of the period, with the FTSE 100 sliding the whole week and the Dow Jones dropping through to Friday, when it managed a small recovery. That recovery coincided with the check in gold’s progress, suggesting that the traditional inverse link between gold and stocks might be rebuilding itself after the recent break. It’s too early to be sure about that after the way the markets have been behaving this year but if that trend continues it could get a bit easier to predict gold’s movements in future. What may be happening is that the frenzy of currency trading sparked by the Eurozone crisis is dying down slightly, shifting attention back to equities and commodities. The Euro has been stuck around $1.09 for the past week, and seems unable to climb any higher. There’s speculation that by the end of the year it could sink to, or even through, parity with the dollar, but for now it isn’t really moving and that may have cooled down the FOREX market temporarily. At the same time, with equities sliding, the obvious place for investors to go was gold. That seems like a reasonable explanation for the week’s activity.
At the same time, there’s not a lot going on in the crude oil sector. Prices are still fluctuating in a narrow band, with WTI selling for $48.87 last Friday and Brent slightly down over the week at $56.41. There hasn’t really been a lot of movement there for the last month, making oil increasingly unattractive as an investment. All the action – and potential profit – for commodities right now is in metals, and gold is the flagship of the metals market.
The global financial markets are still unusually volatile and the Eurozone situation means that’s likely to continue for a while; Greece seems no closer to coming up with a budget the rest of the single currency’s members can live with. That means conditions are going to stay unpredictable in the medium term and another FOREX frenzy is highly possible. The underlying fact is that gold is still undervalued, though, so there’s every chance that the recovery we’ve seen over the last few weeks could strengthen into a longer-term trend. The possibility of that means it’s worth increasing your stocks now while the price is still low – that could pay off in a matter of weeks.
- March 21st Weekly Gold Market Update
- April 4th Weekly Gold Market Update