Gold Prices Set For Second Weekly Decline

Precious metal trading was flat in Thursday, but gold looks set to end the week on a low. Trading ended in Wall Street yesterday at $1289.80 and is already $1.60 down in early trading today. Traders are waiting for the outcome of the Ukraine referendum before they commit to investments.

Geopolitical tension in Eastern Europe had helped gold rally back over $1300 an ounce, but fell in sharp decline once Vladimir Putin gave a strong indication the Kremlin want to resolve the conflict in east Ukraine without military intervention.

The Russian Premier called for pro-Russian separatists in Donestk to postpone the referendum scheduled for Sunday 11 May and claimed to have withdrawn the 40,000 troops stationed on the eastern frontier. The UN however, say there is no evidence to support Russian troops have been removed.

Although the initial reaction from traders was to shed their gold investments, the uncertainty has caused them to rein in risky investments. As a consequence gold has traded flat on Thursday and is unlikely to move a great deal today either.

Anti-Ukraine rebels stationed in Donestk have declared the referendum to separate the region from Ukraine will go ahead on Sunday as planned stating the decision must be decided by “referendum or war, and we choose the peaceful way.”

US and UK economy upbeat

Positive economic data coming from the United States supports the Federal Reserve’s decision to taper their stimulus program. With the labour market gaining momentum, traders will favour equities backed by the US dollar and gold prices will continue to fall.

Although FED chair Janet Yellen was non-committal over monetary policies, the consensus among traders is the positive signs of economic recovery in the US will have a knock-on effect globally and the financial future will begin to look rosy once again.

The sentiment is supported by the National Institute of Economic and Social Research (NIESR) in the UK who issued a report this week stating the six year recession is nearing an end and predicts a 2.9% growth in GDP this year. Director of NIESR, Jonathan Portes says, “The British economy is very close to being bigger than it has ever been.”

Good time to invest in gold

Although there is still some uncertainty in major markets, there is sufficient data to support economic growth in Europe and the United States which will prompt traders in the West to back equities rather than precious metals.

Russian stocks are inevitably an attractive proposition for long-term traders following the Ukraine crisis and sanctions imposed by the West, but they will recover quickly once the unrest is resolved and confidence is restored in eastern European markets.

All this is great news for consumers looking to add gold bullion to their investment portfolio as continued price drops in precious metals make an attractive proposition – especially considering the potential ROI on gold.

Precious metals are used as a safe haven investment in time of economic strife and given the next financial collapse could cripple banks the value of gold could easily gain $200 or more per ounce. Buy gold bullion from today and you will be glad you did when the credit crash brings the financial system to its knees.