It’s taken almost three months for the gold market to behave as predicted. In the first quarter of 2014, the price of gold hit rising levels analysts did not see coming. This week’s correction was a long awaited prospective and a great opportunity for investors who had a late start to “board the train” at prices that are attractive.
Unlike the Syria crisis last year, the situation in Crimea will have a direct effect on the EU economy. Russia has essentially annexed Crimea and is amassing troops at the border of Ukraine, and while most of the world would agree that the Americans had no business intervening in Iraq or Syria, Ukraine is right next door to Russia and at the same time a gateway to natural gas consuming Europe.
The escalating tension has caused relations between the United States and Russia to regress back to the cold war day and the Cuban crisis, and while we may not be on the verge of a nuclear war, it does seem we might be headed for a new political freeze. The US has already begun issuing sanctions against Russian officials and supporters and the Russians are likely to do the same to western investors. A Ukraine toy factory was shut down yesterday.
Other influences in the rise of gold prices was the perceived slow-down of the world’s two largest economies. Poor economic data from the US since the turn of the year struck fear throughout the financial community and traders turned to the safe haven of gold. Last week a default payment in metals in China has left policymakers in the People’s Republic with a potential credit crunch to divert.
Janet Yellen’s recent announcements on FED policy has changed the fortunes of gold. The recently appointed head of the US central bank has hinted the intention of increasing interest rates in six months’ time, although whatever measures are taken, it seems that investors have lost their trust in the dollar, and the trend of major economies replacing dollars with gold for their reserves is irreversible; that is good news for the gold market.
On the other hand China, the world’s largest raw commodity consumer, is facing its own difficulties, and this is becoming more and more evident in the past few weeks. In its struggle to increase its holdings in physical gold, the world’s second largest economy created more problems than it bargained for as consumer spending is really getting out of hand.
The price of gold seeking technical support
As many analysts have pointed out, prices moved from a $1,191 per oz. lows to $1350 an ounce since the Ukraine tension began on 23 January, therefore we can find no strong support at any level in between. Prices found strong resistance at $1350 an ounce, in fact forming a double peak, but the market’s momentum forced prices to go even higher. Next week will show if prices can find support at these levels or whether buying opportunities should arise much lower.
Checking the market through data provided by coininvestdirect.com will help you enter the race to buy gold at the lowest possible prices.