September 8th Weekly Gold Market Update
The recovery we saw in the gold price last week seems to have been a blip, because this week it’s lost everything and finished even lower than it was before the uptick. In fact the low this period was all the way down to $1,260.40, and by the time the markets closed on Friday it had only managed to drag itself back as far as $1,268.40. Overall that’s a loss of $17.40 over the previous period.
So what happened? It really looked as if gold had turned itself around and was ready to climb, but as soon as trading opened on Monday it went over a cliff and didn’t recover all week. We’d have expected that to happen if the stock markets had made a strong recovery, but they haven’t; the Dow Jones Industrial Average actually fell slightly through most of the week, and ended only a few points up on the last period. London’s FTSE 100 performed slightly better but still didn’t make up the ground it lost in the last week of August. With this lackluster performance from equities gold should have at least held its value and probably gained.
It’s possible investors are anticipating a recovery in equities over the next few days. News of a ceasefire agreement between Russia and Ukraine could calm worries about the European markets – that might explain why the FTSE performed better than the Dow Jones through the week. On the other hand it would be unusual for the gold market to anticipate equities like that.
The real surprise is that gold’s support at the $1,275 mark, which has been holding up pretty well, gave way immediately on Monday. If that doesn’t rebuild itself soon – and it won’t with the price below it – we could see a new floor establishing itself close to $1,250. A lot of it depends on where stocks go from here. Those markets are still basically flat at around the same level as late July’s high, and if they don’t show some life soon a revival for gold is almost inevitable.
It’s not all bad news. Gold is losing ground relative to stocks right now, but it’s actually gaining strength compared to commodities. In fact the Gold/Commodities ratio has been rising steadily for the last three months. It’s been tracking the Standard & Poor 500 quite closely, too.
What most investors will be wondering is what to do with their current holdings. Selling now is a safe option but probably an expensive one; unless you’ve been holding it for a while you’re unlikely to make much profit at the current price. It’s also probably premature. The spot price is now artificially low. It shouldn’t be down here. That means it’s going to rise in the future, even if that doesn’t happen in the next couple of weeks. For the bolder investor it’s even worth looking at stocking up on bargain-priced metal.
So, yet another startling week for gold traders. It looks like 2014 is going to be a year that anyone with an interest in precious metals won’t forget in a hurry – and there are still four months to go. Let’s just see what happens next.
