September 1st Weekly Gold Market Update

It looks like last week’s pessimism over the gold spot price might have been slightly premature. This hasn’t been a great week by any stretch of the imagination but we’ve seen a modest recovery over the week. When markets opened on Monday gold immediately dipped from last week’s close of $1,280.61, but quickly turned round and headed up. The week’s high was $1,288.70 on Thursday, and it closed at $1,285.80. That’s only a $5 gain over the period but it’s definitely a movement in the right direction.

Some support at the $1,275 level was predicted, and the events of the week seem to bear that out. It looks like Monday afternoon’s low price was just too tempting, prompting a buying trend that pushed gold up for the rest of the week.

Externals also look to have helped gold make a modest recovery. The Dow Jones Industrial Average has gained back most of what it lost in late July’s sudden nosedive, but it looks like it could be stuck at that level for the moment. There was very little movement in stocks over the week, with the markets finishing only slightly up on Monday. Stagnant equities are always good for commodity prices, precious metals in particular, and unless the Dow and FTSE 100 – which also looks stuck not far from where it was in July – resume their climb soon that could start a move back to gold.

The international situation could also prove to be favorable for gold. While the ISIS problems in Iraq are unlikely to have much of an effect on world markets the same definitely can’t be said for what’s happening in Ukraine. After a few months of minor crises it seems to have flared up seriously in the past few days, with open fighting now going on between Ukrainian troops and Russian regulars, and that could have serious implications for the European markets. Tougher sanction son the Putin regime, which seems immune to financial hardship, could see retaliatory cuts in energy deliveries; that’s going to have a serious impact on energy prices and could put a big dent in growth figures around the world. If that happens we’ll probably see more retrenchment in equities and gold is going to become the safe haven of choice for a lot of investors.

It really has been a difficult year for precious metal analysts; spot prices have defied conventional wisdom so often we sometimes feel like we’d be better just pulling predictions out of a hat. However this week, with gold rising and the stock markets taking a pause, things have become a bit clearer. We still see support for gold at between $1,275 and $1,280 if it dips again, but barring a renewed climb in stocks there’s a good chance of it rising again next week. Look for a brief dip on Monday followed by sustained improvement the rest of the week, and don’t be surprised if it touches $1,300 again by Thursday. If you’ve been hesitating to buy then this could be your last chance to grab a bargain before prices take off again.

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