Gold has started the week strongly by hitting a two-month peak of $1278 per troy ounce. A dip in equities last Thursday prompted the yellow metal to rally and as cracks are already beginning to appear in banking data the global economic revival already looks as though it is built on sand.
Gold prices in Japan rocketed by 63 per cent in response to government plans to raise inflation, whilst tighter credit control in China has caused an economic slowdown. As Asian shares have taken a nosedive, the US Federal Reserve continue to pump electronic money into the system.
Recent economic data also reveals that the US employment market is not as strong as initially thought. Reports published in the first week of January showed the job market in the US was up by 7%, but it is now apparent that these figures included employees who start date for the new job had been pushed back to January due to the seasonal holidays.
Now traders realize the economy is not as strong as initially thought, investment banks are hedging their equities against precious metals. Confidence in the global economic recovery is down and given gold is the best asset to use against risky stocks, precious metal prices are going up.
Federal Reserve meeting
The Federal Reserve monetary committee, meet again tomorrow (Tuesday 28th Jan) to discuss another round of quantitative easing. Given the disappointment of the latest employment statistics and subsequent weakening of the US dollar, it is a given the central bank will continue their stimulus program.
It had been expected that the Federal Reserve would announce a further $10 billion reduction to $65bn, but even if they do, it is doubtful traders will continue to have faith in the market until economic data improves. We could see gold prices rise for the next couple of weeks.
The patterns we are currently seeing in the market was predicted by analysts before Christmas. Speculators believe gold prices will rise before they fall and despite the cracks beginning to appear in the debt ceiling, banks have invested too much money into the market to allow it to fail.
For investors looking for a solid long-term gain, 2014 presents a prime opportunity for you to add precious metals to your portfolio. Given the high demand for physical bullion, the low prices are clearly attracting investors. However, one the equity markets stabalise in a couple of weeks, gold prices will begin to fall.
Physical gold is in high demand. The Asian market in particular is reporting high quantities of gold sales and several mints have already sold their 2014 gold coin allocations. The quandary then is do you buy now whilst bullion is available, or wait until prices drop.
For the best deals, you are better waiting for prices to drop, although the affordable bullion may not be available. Visit coininvest.com to check on availability of our precious metal merchandise, but do not leave it too late to order the items you want to avoid disappointment.