Gold fell as low as $1,250 per ounce today, but recovered to a respectable $1,285. The reason for this could be due to the unravelling of the US debt deal, the repercussion of which could be massive.
The events have spooked the market, there may also be a pull back on prices the closer the US get to a new deal.
It sounds impossible that congress will not reach a deal because of what that will mean for the US and world economy – and in turn their trading partners. The deal must be reached by Thursday, however if they fail, serious impact on markets will quickly became apparent, one most relevant to commodities traders is that gold demand will rocket while investors plough their money into the gold safe-haven.
Positive economic data
Another two causes for gold to go up, is the ongoing risk of US military action against Syria if negotiations fail, there is a deal on the table to avert US military force by allowing destruction of Syria’s chemical weapons. The second perhaps even more relevant, is the concerns analysts have about inflation becoming out of control and plunging us back into a depression. The reason for this is due to the excessive currency note printing during depression in an attempt to stimulate economic growth.
We have had a succession of positive economic data released from various corners of the globe recently and this has caused gold demand and price to in comparison to 2011 to 2012. So you can buy a larger gold weight for your money at today’s prices. A large proportion of traders have taken advantage of the relatively low price of gold and have continued to open buy positions.
It seems that buying has slowed a little since yesterday when 97% of traders were buying and today 84% are buying, this is still a high figure but looks like buying is slowing because traders are either waiting for the US debt deal outcome or waiting for a pull back on the price rises.
Exhausted gold supply
Regardless of the current tug-o-war over gold prices, we can expect prices to rocket over the long term. It has been estimated that gold supplies will be exhausted by 2033, and this is estimated at today’s rate of demand, however gold demand seems to increase over time.
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Gold is a relatively calm investment in comparison to perhaps forex, there is movement but generally trends are not very dramatic. Watch live gold charts for sentiment and breaking news particularly about economy and politics to decide when the market is best for you to buy or sell your gold bullion.