Continuing sales of gold in the Asian market indicates market sentiment is with currency backed investments. Precious metals look set to begin a steady decline in light of a strengthening global economy and the potential resolution of the Ukraine crisis.
Gold prices began the descent yesterday afternoon, shortly after Vladimir Putin called off troops stationed on the Russia border with East Ukraine. A referendum scheduled for Sunday will end geopolitical provocation and stabilise financial markets.
Investors therefore can look forward to lower gold prices which should increase demand. According to the latest World Gold Council (WGC) reports consumers demand trending is down on last year when investors took advantage of low prices.
Gold proves its worth
Precious metals have long been a safe haven favourite with money managers due to its resilience during times of economic and political turmoil. Global demand for gold jewellery is always high, especially in Asia as it is predominantly used as a dowry and a symbol of wealth.
Central banks have also been stockpiling gold in recent times, most notably in China, Russia and Iraq. All three countries intend to shake their reliance on the US dollar which is looking weak in light of the fiscal cliff the US Federal Reserve will have to manage at some point in the near future. US debts are currently in the worrying region of $18 trillion.
The amount of physical gold purchases show encouraging signs for the market as traders tend to cover risk assets with gold and to diversify investments. Economic data on a global scale is also gaining momentum especially in three of the top four biggest economies, the United States, Germany and Japan.
Despite the figures showing positive signs of a financial recovery, the global economy is not stable yet. Policy makers of central banks are not prepared to alter their stance until local economies are deep rooted and they can increase interest rates.
An increase of interest rates will bring the value of precious metals down even further as metals do not benefit from interest rates. For investors looking to add gold, silver and platinum to their investment portfolio therefore, the coming months appear to be a prime time to buy.
Analysts warn of impending crash
Investing in gold is one of the best assets you can buy as the value increases considerably during a financial crisis. Analysts the world over are warning of an impending credit crash that will bring the banking system to its knees.
Gold is therefore an astute investment as prices are likely to break through the $2000 an ounce threshold and reach all-time highs. Savvy investors will also look to the precedent set in Cyprus last year that allows banks to take money from their customer’s bank accounts if they have over a certain amount. In Europe the ECB set a figure of €100,000.
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