Gold continued its rise for a sixth-straight session in early trading on Monday as global cues trigger a week of consistent buying. Prices settled in $1275.90 over the weekend, but were already up to $1281.30 an ounce before the European market opened.
Trader sentiment is clearly with precious metals since the European Central Bank announced plans to cut interest rates on loans. With the US also promising interventions to curb the escalating violence in Iraq, gold is expected to extend its gains over the near-term.
However, analysts think that if the Federal Reserve deliver upbeat news on interest rates, the bull may be capped and gold prices will level off. Expect prices to hang in the balance around the $1300 mark again like they did during the Ukraine crisis.
Insurgents in Iraq
Violence flared in Iraq last week when Sunni Jihadist countered a lightning offensive and claimed huge areas of land and took control of Baghdad airport. The fight back from insurgent comes just weeks after US President Barrack Obama removed thousands of troops from the region.
The much-maligned ISIS forces is now thought to have a 6000-strong man team and are supported by what is left of the Iraqi army and Shia men faithful to the US. It was the Shia who suffered the most under the hands of former Dictator Saddam Hussein.
With the likelihood of US troops returning to the battle ground, investors have pulled their stocks out of risky assets backed by the dollar and returned to the safe haven of gold. Precious metal prices had been slipping and making them an attractive proposition to consumers, but now the bulls are running again, it may put consumers off.
Iraq may not effect gold
Despite the early scares, some analysts feel the geopolitical crisis will not be a catalyst to spiral gold prices. Although they will probably continue their climb towards the $1300 threshold, upbeat economic data in the US should prevent the rise getting out of hand.
The Federal Open Market Committee (FOMC) are scheduled to meet later this week and an update on plans to increase interest rates is expected. Since Janet Yellen took over as chairwomen she has consistently tapered the money-printing stimulus in light of a growing US economy.
The quantitative easing program is expected to end in Autumn, and a rise in interest rates could follow in 2015, although it is likely to be pushed back to the second or third quarter, particularly if more US troops are returned to the Middle-East.
The US economy is the biggest in the world and its strengthening is a good indication the global economy is growing also. China and Japan are dragging the Asian market back to a strong position and in Europe, markets in Germany, France and the UK are all moving in the right direction.
Gold prices are expected to hover around the $1300 mark for some time, perhaps until the violence in Iraq is quelled. To get the latest deals, check out deals on gold bullion at coininvest.com.