Gold prices ended the week flat in anticipation of the referendum in Ukraine on Sunday. Key technical indicators in the spot charts indicate next week’s trading will be determined by the outcome of the referendum.
The geopolitical crisis in the Ukraine took another turn this week with anti-Kiev activists announcing they will ignore Vladimir Putin’s call to postpone the ballot at the weekend and forge ahead with the vote to become self-governed.
In all likelihood, the regions of Donestk and Luhansk will vote for self-rule, although the Interior Ministry of Ukraine claim that two-thirds of the population will decline to participate.
The general consensus in Eastern Ukraine is the people want a Republic that will be governed separately from a “fascist, pro-American” government in Kiev. However, voters are under no disillusion that a vote for independence will not prevent the country from civil war.
Gold sell off on hold
Gold ended Friday’s session on $1290.10, but spot prices had dipped as low as $1286 an ounce. A positive vote for independence in Sunday’s referendum would ordinarily send prices toppling this coming week, but it will depend on the reaction of Kiev and Moscow which determines the direction the balance will swing.
The West are accusing Russia of manipulating unrest in the Ukraine and NATO says there is no evidence to support Putin’s claims that Russian troops have been withdrawn from the border. Stricter sanctions are being threatened in the areas of energy and finance.
The Ukraine crisis supports a risk premium that is preventing traders from selling off precious metals, but of the 24 responses in the Kitco News gold survey, only seven analysts feel prices will remain unchanged. The majority, albeit only 11 market watchers see weaker prices.
Continued battles in Ukraine will most likely hold the precious metals market up, but traders may bite the bullet and sell anyway meaning prices could fall $20 to $30, although it is likely to be a steady decline rather than a sudden drop.
Fed supports decline in bullion
Janet Yellen’s address to Congress earlier this week will also weaken gold’s value if violence does not escalate in Ukraine. With the Fed chair suggesting US economic data shows promising signs of revival, there will be optimism on stock floors around the globe this coming week.
Interest rates do not favour gold and with the UK economy growing quicker than expected the Bank of England may soon lift base rates from their all0time low of 0.5% and the Fed may stick to proposals of lifting rate in the US in the first quarter of 2015. A conclusion to the Quantitative Easing program looks to certain to end in the autumn.
May has the potential to be an excellent month for investors to add gold bullion to your investment portfolio for attractive prices. The yellow metal promises a handsome return on investment given the inevitability of a major economic crash once the debt ceiling collapses. To make sure you don’t miss out head over to coininvest.com today and check out the latest deals on gold bullion.