Gold enjoyed a $14 uplift today despite the US Central Bank announcing its intention to continue the tapering of its bond buying program. In a speech in front of the House Financial Services Committee on Tuesday, Federal Reserve Chairman, Janet Yellen declared she was committed to the current monetary policy strategy.
Despite a succession of poor economic data coming from the US, Yellen alleviated fears the Fed would not trim their stimulus program for a third month running. Had that been the case, investors would have turned to gold and pushed up prices.
Gold is currently ringing in at $1288.78 (16.11GMT), up 1.10% from yesterday and is holding its own. However, once the Fed trim another $10bn dollars off their monthly spending we should expect to see gold and silver prices fall. An analyst survey estimates gold prices will average US$1220 an ounce in 2014.
Gold prices in balance
Mixed data since the turn of the year has seemingly caused confusion amongst traders. Precious metals came into 2014 on a downward spiral on the back of economic data published in the US suggesting the global economy was recovering and picking up pace.
The figures however, turned out to have been misconstrued due to a delay caused by the seasonal holidays so appeared more positive than they actually were. It was not until markets leveled out that the cracks in the global economy started to appear. Subsequently investors lost faith in equities and turned to the safe-haven of precious metals.
Market sentiment is still bullish towards gold and silver and until economic data proves otherwise traders will continue to tread with caution despite what the Fed do with their bond buying process. It will be interesting to see how investors react, but analysts are predicted gold price could fall to as low as $1,067 later this year.
US currency v gold
Gold moves in the opposite direction to US currency and with the dollar slipping gold has hit its highest peak for three months. However, the rise of gold value is not expected to last much longer and precious metal prices will be even more attractive to long-term investors that they already are.
The slowing down of quantitative easing in the US and China together with weak inflation round the globe, an oversupply of gold and investors selling off the ETF´s will all influence gold´s decline.
Purchasing gold is a long-term investment and with prices likely to fall over the next 12 months this is a great time for investors to add gold and silver to your investment portfolio´s at attractive prices.
Given gold reserves will run dry in twenty years time, this could be the last opportunity for gold to enter a bull market in which investors can profit from massive returns. The next economic collapse could see gold prices break the $2000 threshold so buying one kilo gold bullion bars now could profit you around $800.
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