The gold market’s short term reaction to events in Iraq is an apparent exhibit of its disorientation and lack of momentum. It appears that investors are taking too much comfort in this low-volatility period, and as a consequence of that, taking bigger risks.
It is volume that makes the market more efficient and liquid. This by no way implies that it should always be moving upwards, but gold’s arduous effort to climb over the $1,300 an ounce mark is a definite sign of the market’s fatigue.
Investing in gold based on financial news
In less than a week, a Sunni-led group, the Islamic State of Iraq and Syria (ISIS) has seized several key cities in the north and center of Iraq, one of the world’s largest oil producing countries, causing its largest oil refinery’s to shut down on Tuesday.Brent crude prices were then at $113 per barrel, a little over the $110 a barrel price that was boosted after the wave of revolutionary protests known as “the Arab Spring” swept across North Africa and the Middle East.
According to Capital Economics on Tuesday, global growth has been “sluggish” since Brent crude prices rose above $100 per barrel, and economic activity tends to slow sharply when they cross $120 a barrel.
Despite the risk of American troops returning to Iraq, this is not a geopolitical crisis nor are there any fears of a generalised military conflict, but rather a situation that has only one thing in common with the Ukrainian crisis: it is a threat to the global energy sufficiency. Thus, it may turn to an energy crisis, and this is serious financial news.
Ukraine, EU and US interest rates
After the European Central Bank announced measures to cut interest rates on loans hoping to boost the economy, precious metals showed signs of reaction.After the Federal Reserve announced that interest rates will remain low, gold prices rose for the first time in three days boosting demand for the precious metal as an alternative asset.
No big surprises sprang from the Federal Open Market Committee as it voted to cut back its monthly bond-buying by $10 billion. In addition the committee repeated its intention to keep the short-term interbank lending rate at zero to 0.25 % for a considerable time after the asset purchase program ends.
All this is indeed important financial news, although some analysts believe it is not enough to change the market mood. Not all investors are ready to withdraw their money from their bank accounts and invest in gold, simply because not all people in the world are investors. If their leaders say that everything is going to be better with inflation and growth, why take the slightest risk investing in something you know little about?
However, informed investors can see that everything is not alright with growth and inflation, especially when Iraqi oil and natural gas flowing from Ukraine might cause an upcoming global energy crisis that shale fuel production cannot taper.
Seeing what’s coming sooner rather than later can help you profit from gold’s prices, plus the deals coininvestdirect.com has to offer make it even easier.