Gold fell more than US$15 and ended the week at its lowest ebb since October. Traders are ignoring the tensions in the Ukraine and clearly have faith the geopolitical issues between the West and Russia will end peacefully.
It certainly appears as though the Ukraine crisis will blow over without the need for military action despite Russian Premier Vladimir Putin lining troops along its neighbour’s eastern frontier.
On his visit to Europe this week, US President Barrack Obama, announced there will be no need for a military strike, although military leaders are warning the Russians may have plans to recover Moldova as they have Crimea. That may be a concern.
Good news for gold investors
Market sentiment is clearly with the recovery of the global economy and with positive news coming from the US in recent weeks, the financial future looks promising.
Job data, manufacturing and consumer spending are all on the rise, and despite the housing market lagging behind estimates, it has not deterred traders to back the US dollar and sell their gold.
The low gold prices however make this a prime opportunity for investors looking to add gold to their investment portfolio.
Market analysts had predicted gold to fall to an average of $1220 an ounce this year, but the buzz on the Street is that prices should be kept as close to $1300 as possible. This is in reaction to the Fed’s decision to increase interest rates in early 2015.
Asian gold market
China remain the dominant force in gold purchases with 192.8 tonnes of the yellow metal being shipped to Hong Kong so far this year. Now gold has dropped below the $1300 mark demand for physical gold is expected to rise across Asia too.
The surprise news this morning came from the Iraqi Central Bank who announced they invested in $1.5bn worth of the yellow metal in March. The oil rich country is concerned about the performance of the US dollar and is looking to protect its dollar-backed investments.
The dollar has had a typically turbulent month, but is expected to get stronger over the coming weeks now investors are returning to the US market rather than emerging markets like Turkey and Brazil.
Buy gold at low prices
Trader sentiment is clearly with equities at the moment despite the gold buying activity of central banks. This however is no cause for concern as bargain-hunting investors recognised a quick dollar could be made when gold prices went on the rise.
Gold is still a shrewd investment, particularly for coin collectors and casual investors wanting to boost their savings, protect their financial future or build a nest egg for retirement.
Investors may not get another chance to purchase gold at these low prices and with traders talking about a $1300 balance the likelihood of prices falling low are in doubt.
Whether prices fall any lower remains to be seen, but the one thing that is not in doubt is, gold prices will go up again.