Gold prices dropped another $7 by close of play in London today, although an increased consumer demand for physical gold is protecting precious metals from plummeting further.
With the global economy showing promising signs of recovery, trader sentiment has turned to US equities.
That speculators feel there is little need for a safe haven gives us all reason to feel optimistic – especially consumers looking to take advantage of weaker gold prices.
Bullion is down by 7.5% already this year and economic indicators suggest precious metals will continue the same course over the coming weeks. Much rides on the US economic data for March however, which will be published later this week.
Should job data in the United States be as positive as it was in February there will be little chance of a price recovery for precious metals – unless of course the Ukraine crisis gets out of hand, although at present talks between the West and Russia appear as though they will reach a peaceful resolution.
Consumer demand for gold
Investment banks may be selling their gold stocks before prices get any lower, but consumer spending on gold is on the rise. During the gold rally in February and the first half of March consumer sales slipped, but now prices are back under the $1300 per ounce barrier, an interest in precious metals has piqued.
This has certainly been the case in Japan, where Tanaka Kikinzoku, Japan’s biggest jewellery retailer announced a 423% increase in gold sales in March. However, this is due to a three per cent consumption tax increase that will be introduced this week in an attempt stoke inflation and reduce the countries bulging debt crisis.
And it is not just gold bullion that is doing well. Investors have turned to bullion backed exchange-traded products (ETP) in anticipation of an uplift in US interest rates and the Federal Reserve’s trimming of its stimulus program.
Gold is also being saved from a heavy price drop thanks to continued buying from China’s central bank and an indication the European Central Bank will invest in metals to support further Quantitative Easing measures.
Great time to buy gold
That gold prices are falling is good news rather than bad, as it shows the world economy is straightening itself out and that we can look forward to a prosperous financial future. It also means that gold bullion is available for attractive prices that buyers are certain to make handsome profits from.
The strength of the economy will not continue this way forever. Inevitably there will be another crash of the market and many more years of depression. Analysts predict the next crash will be even more devastating than the 2008 banking crisis that has taken six years for us to recover.
The next market collapse is likely to be caused by the increasing debt banks around the world are amassing due to the credit culture. When this happens gold prices will rise again and could easily breach the $2000 an ounce threshold. If you buy gold now, it promises to be a great investment.