Gold is gaining a lot of support at the minute. The catalysts in the last two weeks have moved prices from an imbalanced price point floating around the $1250 an ounce mark to over $1300.
In early trading in Asia, a selling off of the yellow metal has seen prices fall by $3.40. However, at the time of writing the London market is not yet open and Wall Street is still in the dark.
Violence in Iraq sparked a fervour of buying 10 days ago, but prices really rocketed last week following the two-day meeting of the Federal Open Market Committee (FOMC) in Washington. Although there were few surprises in the Janet Yellen’s address to the press, traders reacted as though gold was the must-have commodity on the market.
And in a way it is. The FOMC are holding back on a decision to raise interest rates in the US and therefore weakening the dollars position. Not only that but Yellen told the press they US central bank is committed to low interest rates for some considerable time – likely to be at least a year.
Optimism for gold
With oil prices being pushed up by events in the Middle-East and scant promise of a good ROI on over-priced equities, gold has once again become the go-to investment for traders. Precious metals are often used as a hedge against riskier investment, but in the current market there is a good opportunity for traders to make some healthy short-term gains.
Gold also performs well in times of war, political upheavals and economic strife. Sunni militants in Iraq are running riot over the country and are taking charge of major cities one by one.
The destructive march of ISIS has prompted US Secretary of State to land in the war torn country to declare the American people are committed to helping the Iraqi cause and bringing stability to the country – echoing the sentiments of the US government when they first sent troops to the Middle-East over 10 years ago.
Meanwhile, the geopolitical crisis in the Ukraine appears to be far from over. Despite an agreement on a cease-fire, violence has flared between Kiev forces and pro-Russian militants. Putin reported the Ukraine had used artillery weapons whilst the Ukraine government have accused separatists of attacking a military base on the Russian border.
The pull-out of US backed assets also indicates that traders have concerns over the strength of the greenback and are casting doubts on the validity of economic data. Some analysts have called the increase in housing another bubble waiting to burst, whilst others suspect the figures have been manipulated to make the economy appear stronger than it really is.
The Federal Reserve have been accused of lacking aggression, and whilst Yellen claims they do not want to force the growth of the economy, traders have lost confidence and patience in their claims the US economy is on the mend. As a result, investors are turning to gold for protection, and maybe so should you. For the latest deals on gold bullion, visit coininvest.com today.