September 23rd Weekly Gold Market Update

Gold’s long slide obviously isn’t over yet, with the spot price seemingly determined to approach its one-year low unless something happens to turn it round. When the markets opened on Monday gold eased up slightly then resumed its fall with barely a pause; by the time trading stopped on Friday it had fallen to $1,216.20, lower than any time since the first week in January and $12.10 down on the previous period. That’s a fall of nearly $166, or 13%, from where it was standing in late March.

The previous week it looked like the main downward pressure on gold came from the current strength of the US dollar, which has made currency a more attractive short term option. That factor was still in play last week with the dollar staying very high against a basket of the other major currencies, particularly the Euro and Yen. As long as this continues it’s likely to draw investors away from commodities and, to some extent, equities.

On the other hand it certainly wasn’t as bad a week for equities as it could have been. In fact the Dow Jones Industrial Average rose nearly 250 points through the week, its best performance since mid-August, which suggests that the recent jitters over weak growth in the US economy are starting to recede. London’s FTSE 100 also climbed sharply after a dip on Monday and Tuesday, finally closing 31 points up on the previous period. The main source of buoyancy in the UK is the unionist victory in Thursday’s Scottish independence referendum, which has been plaguing both sterling and the wider economy with uncertainty for weeks; with the current structure secure investors are calming down and that’s reflected in higher values for British stocks.

Other commodities haven’t exactly been setting the world on fire either but they’ve generally managed to hold their value over the last week, adding even more pressure to gold by leaving a safer option for those determined to stay in commodities. Crude oil saw a spike to $95 early in the week before falling back to $92.41, an overall loss of 66 cents. On the other hand Brent crude fell at the same time then recovered sharply after the Scottish referendum result, as expected – the future of North Sea oil was a major worry.

As always the question is, where’s gold going to go next? It looks like it still hasn’t found any new support; the next chance of it finding a floor is at $1,200, and at the current rate that will be tested in the next few days. If it doesn’t stabilize around that level there’s every chance it will head on down to challenge its 12-month low in the region of $1,185, but we just can’t see it going much below that. There really isn’t any reason for it to. That means gold remains a bargain investment and one that offers a lot of potential for some very good medium and long term gains. And of course remember the old adage about buying low and selling high.

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