When finance ministers meet in Sydney for the G20 precursor this weekend, the revival of the global economy will be top of the agenda. Stocks and equities have been in turbulent form of late and the volatile market is concerning emerging economies.
The strengthening of the Euro and pound sterling has pushed the currencies of emerging markets down. Delegates from the likes of Brazil, Indonesia and Turkey will all demand equality in the restoration of the global market.
The recently appointed chief of the US Federal Reserve, Janet Yellen will be the target of most concerns. In December the Fed commenced the tapering of its stimulus program and intends to continue trimming its bond buying by $10bn a month.
As a result the currencies of emerging countries markets have been weakened as investors began to transfer their investments back to the States. The withdrawal prompted currencies to fall sharply and has created global uncertainty in the stock markets.
Gold is often a good benchmark too measure market sentiment. When the stock markets and currencies are performing well, gold and silver prices fall. Over the past few weeks, both precious metals made reasonable gains before balancing out.
Although gold prices were widely expected to fall in 2014, a slow-down in economic growth in China and the US caused concern amongst investors and they backed gold to hedge against riskier investments. Disappointing economic data on the US job front also set off alarm bells.
Investors back gold
Until confidence is restored in the market precious metal prices, and the stock market in general, will continue to swing back and forth between equities and commodities.
The International Monetary Fund (IMF) has warned advanced economies about pulling back their stimulus programs too early, although did acknowledge they had to put domestic responsibility first.
Finance ministers of emerging markets however will be hoping a satisfactory conclusion can be reached with powerhouse economies and will want reassurances their currencies will not suffer any further damage. However, in some cases such as Argentina, the weakening of the damage to their currency was of their own making.
The key focus of the meeting however will be finding a solution of boosting global growth – and that may come at the expense of emerging markets. However, Yellen will have to prove the Federal Reserve have reason to trim their stimulus program despite indications the world’s largest economy is suffering from slow growth.
For the time being, global growth is uneven and the financial uncertainty is reflected in a volatile market. Gold and silver may hold their own for the time being, but the outcome of the G20 will be influential in the direction the arrow flows.
After pumping trillions of cheap money into their domestic fronts, the economic powerhouses of China, the States, UK, Germany and France will not dare allow the global economy to fail and we will eventually see gold prices fall as predicted.
With gold and silver on the brink of decline, investors have a great opportunity to add precious metals to their investment portfolios. Long/term investors can expect satisfying returns so head over to coininvestdirect.com today to catch the latest deals.