Gold continued it price rise for a fifth consecutive week as the emerging global economy starts to show the first signs of cracking. It´s only been three months since the US dollar picked up enough momentum to dampen gold prices and with employment markets in Europe and the US look brighter, there is confidence among investors that we will finally pull out a five year financial slump.
However, things went awry this week and the equity market dropped for the first time since August. The cause for concern is due to the easing of manufacturing in China as banking regulators investigate credit risks in the coal-mining industry. The rise in gold prices however, is expected to be temporary.
The US Federal Reserve is schedule to meet again next week to discuss their next move with their quantitative easing program, and if the stimulus continues as expected, the dollar will strengthen again and we will see a fall in gold prices.
Stagnant gold prices
Gold may be holding its own in Europe and the US, but elsewhere there is a lack of interest which may have a knock-on effect with gold prices in a couple of weeks time. ETF holdings have diminished of late and demand for gold in India has been low since the government restricted export trading on precious metals.
Although the premium on gold sales in India has now been relaxed by the Indian authorities, there is still some reluctance in India to invest in gold. Although jewellery remains a popular item, consumers of favouring silver as an alternative.
The shadow Chinese market is also affecting gold prices. Private mines in China do not have to register their gold trading with the London Bullion Market thus the deals are not registered as part of the global spot price on precious metals. Given the Chinese middle-classes are the largest consumers of gold right now, the inclusion of private sales would have a significant bearing on gold prices.
Gold price to drop further
Analysts have had a negative outlook on gold for several months now and are adamant that gold prices will fall before they rise. After price dips at the backend of 2013, gold has held its own since the turn of the year, but it is doubtful that January´s five per cent rise is the first sign of an early recovery. Gold prices are more likely to drop further yet.
The tremble in the equity market is most likely a temporary concern which will be forgotten and resolved once the next piece of positive financial data reaches stock market traders. The margins are that fine.
Despite its little rally of late, gold prices still look attractive to consumers looking to add precious metals to their investment portfolio – although the likelihood is prices will fall even further over the course of the year.
The financial signals indicate 2014 is a great year for investors to add gold to their portfolio´s as prices will not be so attractive once gold goes on another bull run. For the latest prices check out coininvest.com today.