September 30th Weekly Gold Market Update
It’s probably too early to say the gold market has turned the corner, so we won’t. However it’s certainly looking slightly healthier than it was a week ago, when the spot price seemed determined to head below $1,200. Instead we saw a slight rally when the markets opened on Monday, followed by fluctuations through the rest of the period that saw it close at $1,219.60. That’s just over $3 up on the previous Friday, and certainly nothing to shout about, but at least it’s not another fall and it potentially sets gold up for a recovery.
If we go looking for the reasons behind gold’s sudden recovery, one stands out right away. The spot price was more or less a mirror image of the stock market all through the week. The Dow Jones Industrial Average fell right away on Monday morning, and it’s likely the drop in equities was enough to steady the gold price. The Dow then fluctuated all week to finish slightly down on Monday’s figure, just as gold finished slightly up. Meanwhile in London the FTSE 100 held up through Monday morning until the US markets opened, then fell in tandem with the Dow. If confidence in stocks has been shaken then gold is a traditional safe haven for worried investors, and with the spot price as tempting as it is right now it’s no surprise that some money seems to have moved in that direction. It looks like events in the stock market will be the biggest driver of commodity prices for the immediate future, so if you’re sitting on gold keep a keen eye on the Dow and FTSE – they’re likely to be your best indicator of future price movements.
It’s possible this move to gold has been sparked by the current events in the Middle East. As an international coalition against ISIS starts to come together it’s now clear that the fighting isn’t going to stay an internal affair; US aircraft are already bombing the radicals, and British ones will join them within days. With some of Iraq’s oilfields already under ISIS control the prospect of military action spreading, and the ambiguous role of leading producer Saudi Arabia, is bound to affect prices. Sure enough standard crude (but not Brent) rose sharply last week. Increasing oil prices have knock-on effects right across the economy and gold is well placed to benefit from that right now.
So what does this mean for gold investors? It’s definitely possible that the slide could resume again this week, but there’s no reason for the price to drop much below its current level. There seems to be some support around the $1,220 point right now and that could be an ideal launch pad for a recovery. Without a renewed surge in equity prices there’s no reason we couldn’t see gold heading back towards $1,250 by the middle of October, and if that’s the case the time to buy is now. Once the market starts going up again anyone who didn’t pick up a bargain stock will have more than a few regrets.
