An upbeat report from the non-farm US job data gave the first signs the world’s largest economy is on the mend. Employers exceeded expectations by adding 175,000 jobs to their payrolls in February and subsequently restored an ounce of faith in the stock market.
Good news on the job front also improved the strength of the dollar which regained 0.1 per cent against other currencies after a spate of recent slides.
Gold on the other hand plummeted sharply from US$1350 to $1329.35 an ounce just after the job figures were announced, but ended the day at US$1338.18 in London.
Analysts are now predicting gold will fall below the US$1330 net week, providing nothing drastic happens in the Crimean Peninsula – although things are still looking edgy as US diplomats call for economic sanctions to be taken against Russia.
Stock market professionals are hoping for a sustained growth on US job market over the next couple of months, and with weather conditions improving hopes are high. Evidence that the US economy is strengthening will also lift the growth of the global market.
As the US dollar is used as the benchmark for stock market trading, the relationship between the US economy and the world economy are very closely intertwined. Slow growth in the States usually means slow growth globally.
Now it appears the US job market is beginning to thrive, the signs look promising for the coming months and recovery is expected to accelerate. Although gold has rallied so far this year due to disappointing financial influences and geopolitical policies, it will begin its predicted descent if the global economy yields positive returns.
Since gold crossed the US$1300 threshold, demand for physical gold has waned. ETF’s on the other hand have performed well as traders look to cash in on some short-term gains which could be strung out by the crisis in Eastern Europe.
A fall in gold prices however, is good news for investor looking to add precious metal to their investment portfolio or retirement funds. Seen as a safe haven investment, gold will perform well over the long-term and once prices fall below US$1300 investor can expect healthy returns.
So what is expected of gold now? Before the turn of the year, gold prices were expected to drop closer to the US$1000 mark, with analysts predicting an average spot value of US$1220 during the course of the year. The influence behind the forecast was the inclination of a strengthening global economy.
Investing in gold
Slow growth in the US however, propped gold prices up and together with central banks debasing currencies and keeping interest rates low trader sentiment stayed with gold. Now the US economy is producing encouraging signs traders will return to equities and gold prices will come down
However, all eyes now will be an events in the Crimea peninsula as if tensions increase, gold prices will hold their own above US$1330. But until a resolution is reached, gold diggers will not get the bargains they were hoping for this year!