Russian Premier, Vladimir Putin eased geopolitical concerns over Ukraine earlier today by pulling back troops from the border. The move is a strong indication that heads of state want to resolve the crisis diplomatically rather than with military force. Following Putin’s comments, gold prices nosedived – good news for consumers looking to invest in precious metals at attractive prices.
Gold finished trading on the London market at US$1290 and may drop further before Wall Street turn the lights out for the day, although stock markets are flat suggesting traders still have reservations. Assurances on Ukraine will stabilise the market.
Traders were greeted with the news that violence was escalating in eastern Ukraine this morning and gold continued its slow upward trend. However, following Putin’s call for pro-Russian activists to postpone the referendum scheduled for Sunday 11th May, the yellow metal went into free fall and plummeting $21 in a matter of minutes.
US economy needs support
Chairwoman of the Federal Reserve, Janet Yellen did nothing to aid gold’s decline in a congressional testimony by suggesting the central bank are in no rush to end its stimulus. Yellen announced the slowdown in the labour market still required support, but declined to divulge whether interest rates would be lifted early next year.
Despite the FED’s non-committal, the US dollar was up slightly suggesting traders can see through Yellen’s veiled comments. The US economy may not be recovering as fast as the central bank would like, but stock market traders are satisfied the wheels are moving in the right direction despite the housing sector being a concern.
Although Yellen acknowledged the US economy was on the mend, she remains cautious of emerging markets putting stress on the global recovery and stated “monetary accommodation remains warranted,” hinting the FED would be prepared to step in with alternate plans should the recovery falter.
Positive economic data in Eurozone
Bullion bargain hunters were given a further boost with positive economic data coming from the Eurozone. Although the ECB cut forecast rates to 1.2% yesterday, the insistence that “the recovery is taking hold” and falling inflation will stabilise credit conditions.
Consumer spending has eased the pressure on the ECB to deploy quantitative easing despite no improvement in unemployment. With the risk of deflation being cited as “low” positive signs for the Euro saw a mini rally in equities.
Market speculators forecast gold prices will fall to an average of $1250 an ounce in the second quarter and if talks over the Ukraine issue can be resolved peacefully precious metals will continue to appeal to consumers.
However, some officials have reservations Putin has withdrawn troops from the Ukraine border and are calling for Sunday’s referendum to be cancelled altogether rather than merely postponed. Eastern Ukraine is predominantly Russian speaking and residents are likely to vote in favour of an annexation.
The remainder of the week looks like a good time for investors to buy gold as prices continue to gradually fall. To make sure you don’t miss out, check out the latest deals at coininvest.com whilst you still have the chance to buy bullion for under $1300.