Gold is continuing its steady rise following a continuation of weak economic data coming from the United States. Figures published by the Institute for Supply Maintenance (ISM) fell to their lowest level for four years last month although bad weather conditions different have an adverse effect on business activity.
All eyes will be on the US job index when the figure are released on Friday. February’s report yielded little encouragement with private employers adding 139,000 jobs which was substantially short of the 160,000 forecast by analysts. This fear of an economic slow-down in the US has persuaded investors to back precious metals.
The US nonfarm payrolls report due to be published this coming Friday will give us a clearer indication of how well the US economy is recovering. The Federal Reserve seems intent on cutting its bond buying program suggesting the policy makers are confident the economy is recovering well.
Trader sentiment on gold
Invest bankers do not seem to share the same faith as the central bank following three months of weak data. However, there have been several contributing factors for the disappointing result that were unavoidable. The December holiday season always yields lower results and a severe winter has stunted productivity.
As a result of the poor economic data so far this year, trader sentiment has turned to gold. A lack of confidence in equities has prompted speculators to increase their precious metal forecasts for the next three months – and whilst ever the Ukraine crisis rumbles on gold prices will continue to climb.
There is also a concern that the winding down of the Fed’s stimulus program will weaken the US dollar. The greenback slipped another 0.1 per cent this morning against a handful of leading currencies. As a result of QE pullback, gold has enjoyed a climb of 11 per cent already this year as investors pull out of equities in favour of the metal safe-haven.
Why buy gold?
Gold is a safe alternative to riskier investments such as stocks and shares. In times of economic uncertainty precious metals perform well as they are sought after to hedge against riskier investment. It is for this reason why gold and silver should be part of your investment portfolio.
For the casual investor, gold is an excellent long-term investment. As the cost of living rises gold prices will rise too and even with the premiums involved when buying and selling precious metals, there are substantial gains to be made in the gold trade.
Gold prices had been expected to fall this year, but a chain of events has forced the hands of traders to push the price over $1330. There is still time for prices to fall whereby investors can look forward to some good bargains, but gold will stay strong until the geopolitical tensions in Eastern Europe are eased.
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