November 25th Weekly Gold Market Update
Once again the gold spot price has managed to push upwards, and based on the trends since the beginning of the month it’s now safe to say that at least a limited recovery is beginning to pick up momentum. As soon as the markets opened on Monday gold started rising, which didn’t come as a surprise based on the sudden buoyancy it showed at the end of the previous period, and apart from a dip late Tuesday it kept going up all week. The final price on Friday was $1,202.10, a shade under $14 up over the week. At just over 1 percent it’s still not spectacular, but looking at a chart of the metal’s performance over the last 30 days a clear turnaround can now be seen. The big question is if gold can maintain this direction.
We think it’s an encouraging sign that gold is starting to pick up even with the stock markets continuing to rise. Any gold investor knows that precious metals traditionally gain from falls in equities, as traders look for a safe haven with real, tangible worth. The Dow Jones Industrial Average and FTSE 100 both climbed last week, though, and despite that gold still gained. This is good news because it could mean the markets are recognizing that gold was seriously undervalued at recent levels, and the spot price is now looking for a natural equilibrium. Hopefully this means we’ll see some firm support starting to build at $1,200, or even $1,250. That could then serve as a launch pad for a real recovery over the next few weeks. Another interesting point is that both the major stock exchanges fell briefly in mid-week, in parallel with gold, then recovered along with it. Again this points to a real upwards adjustment, not a substitution effect.
Over the past few weeks another factor affecting the markets has been a seemingly inexorable fall in oil prices. That may also be turning around, with last week’s figures showing small rises in both standard and Brent crude. In the long run higher oil prices could slow down the stock market as company profits are squeezed, but right now it points to a generally positive week in the markets with all key indicators managing to improve. We don’t think rising oil will do gold any harm; with no sign of an end to the two big issues in the oil market – Russia’s standoff in Ukraine and the ISIS insurgency in the Middle East – there is some upward pressure, but until now the continued growth in fracking and shale extraction has been enough to keep the lid on that. More expensive energy is natural as winter approaches but a dramatic rise is unlikely, and that will limit oil’s attractiveness as an investment.
Overall we think this has been a pretty good week for gold, and with the price now rising for three straight weeks it looks like the corner may finally have been turned. If you’re not already holding stocks this would be a great time to buy – the price is still attractive, and if this trend carries on you could be in profit by the end of the year or even sooner.
