In an unexpected turn of events, gold prices hit a 3-month high on Thursday and analysts are targeting a $1300 an ounce threshold. It would appear stock market traders do not have faith in the economy following poor US data despite Janet Yellen confirming the Federal Reserve will continue tapering its stimulus program.
Analysts had predicted gold prices to fall in 2014 – and a survey published early this week forecasts gold prices to average $1220 an ounce this year. However, with US retail sales falling .04 per cent and unemployment figures falling short by 330,000 off the estimates, market sentiment is bullish rather than the expected roar of the bear.
Gold futures up
Gold futures are up by 02% for February and the technical picture is looking more optimistic for precious metal holdings, albeit somewhat disappointing for investors looking to add gold to their investment portfolios. With prices expected to drop buyers may prefer to wait until the market turns.
Despite the mini revival of precious metals the majority of speculators remain negative on gold and fully expect the US market to pick up over the coming months. The global market does appear as though it will recover, but the pick us is slower than many expected after positive financial data released at the turn of the year.
Traders are now targeting pushing gold towards the $1300 mark as the dollar fell 0.5 percent against other major currencies. Questions are now being asked whether the US economy – the biggest in the world – can sustain the growth it showed in the third quarter of 2013.
US Fed tapering
The gradual tapering of the US money-printing stimulus was expected to give traders market sentiment towards equities, but dealers are not as confident in the economy as the Central Bank decision-makers. Analysts feel the Fed is been too hasty in its slowing down of bond buying.
Instead investors are turning to the safe-haven of gold, but it unlikely that precious metals will enjoy a significant increase just yet. There is no logic in pushing gold prices up when stocks are yielding a higher return although the momentum to carry prices above $1300 is the noise coming from Wall Street.
Gold prices typically move in the opposite direction of currency – particularly the dollar which is used as the benchmark against investments and other currencies. It will therefore be interesting to see how traders feel about gold and silver in the coming weeks if the dollar does get stronger.
However, it is expected the Federal Reserve will trim its stimulus by another $10bn for the third month running which may well slow down the recovery of the dollar and turn the hands of investors to take gold prices up to $1300 which may not appeal to private buyers.
Even with prices on the rise, gold is still a solid long-term investment and will enter a bull market when the next financial crisis hits. For the latest deals on gold bullion visit coininvest.com today.