Gold spot price took a surprising tumble today. Despite tension mounting in Ukraine and poor manufacturing data from the world’s two largest economies, investors decided to cash in on bullion’s recent rally.
A slow-down in growth in China and the geopolitical crisis in the Ukraine gave traders reason to turn to the safe haven of gold, and since the end of January, the precious metal took a steady rise to over $1350.
Gold charts turned bearish last week after Janet Yellen, chairwoman of the US Federal Reserve announced the central bank would end its stimulus broken in the Autumn and lift interest rates in early 2015.
Together with positive economic data indicating the US economy is on the path to recovery, trader sentiment turned to equities and gold began a steady decline. The yellow metal has now fallen from a six month high of $1383.40 to $1311.50 in a week. Yet US stocks also fell 2 per cent today.
Stock market traders have several key influences to contend with the moment, and today is evidence they do not know which way to turn. With tensions in the Ukraine escalating and poor economic manufacturing data from both China and the US, you might expect gold to perform well today. Instead it took its biggest fall for over a year.
Market analysts say traders panicked today and cashed in on gold’s recent rally. US stocks and the Euro also suffered minor falls. A lack of activity for physical gold in the Asian market has also put pressure on gold prices although with the threat of a credit crunch looming Chinese money managers have raised their bets on gold futures.
China’s manufacturing machine has slowed down this year and with the Republic’s PMI at an eight month low, there is cause for concern about the strength of the world’s second largest economy. The slow-down is being pinned on the weakness of the yuan and subsequent lack of spending on the domestic front.
New export orders this week however has given rise for optimism and trader sentiment in the Asian market is one built on confidence of recovery given the central banks threats to take a hard line with credit lending following a default on metals two weeks ago.
Although the Euro fell against the dollar, largely thanks to sanctions against Russian officials, the economy in the Euro Zone is starting to show signs of life following a harrowing struggle. France and Germany are leading the charge, both pulling in monthly highs for more than three years.
However, a number of economists have concerns about the deflation of the Euro. Many think the currency will recover in its own time without interference from the European Central Bank’s policy makers, although a delay in inflation will take longer to find a global balance.
The fall of spot gold prices comes as something of a surprise considering all the negative influences, but it appears as though traders are shrugging off poor form in China and ignoring the political farce between old foes.
The fall in gold prices is good news for investors looking to add precious metals to their investment portfolio so head over to coininvestdirect today and take advantage of low gold prices.