Economic data in the US showed more good signs than the economy across the pond is growing, despite other major markets ending the month showing signs of a slow-down. At the time of writing (1400EST) gold was $4.50 for the day and could sink lower before the end of the day’s trading.
Manufacturing growth in the United States was up another 0.5% this month to 53.7 showing positive signs of acceleration after months of slow growth. With more data expected to be published this week, the early signs are that traders will continue investing in equities and pull out of precious metals.
Gold buyers taking advantage of gold prices
Stock market traders have been on a selling frenzy for the past two weeks, cashing in on bargain gains following a six week rally of precious metals brought on by the Ukraine crisis and fears of an economic slow-down in China.
With the US economy showing positive signs of recovery however, market sentiment returned to US-backed equities and the world’s largest economy appears to be back on track.
However, the majority of the world’s leading economies showed signs of weakness this month. The Asian market has been short on demands for physical gold all year, and despite the mad-rush in Japan yesterday buying has been lacklustre. China manufacturing behemoth also fell to an 8-month low although overall the economy grew 0.1%.
Lingering concerns may turn gold
In the Eurozone, British manufacturing also eased to an unexpected 8-month low whilst inflation on the mainland will surely cause the ECB policy makers to take action monetary action this quarter.
The lingering doubts may just be the catalyst that keeps gold on an even keel although the majority of analysts, and it would appear traders, expect prices to continue falling. Some speculators even think gold bullion could bottom out around the $1000 mark this year.
The indicators suggest this could be the case. US stocks hit a new all-time high in March and with market sentiment leaning towards cash investments, a strengthening dollar and the Fed ending its bond buying stimulus, there is less interest or need to back precious metals as a hedge.
Investing in gold
The indicators also point towards over evaluation, which is why some of the major markets are showing signs of slow-down on the balance sheets without there actually being a slow-down in factories. Once the stimulus ends equities will correct themselves and there could be a knee-jerk reaction – probably giving gold a lift.
Of course there will be peaks and troughs for gold and silver before consumers will want to sell. A credit crash, which seems inevitable given the amount of debt nations are in, will send precious metal prices rocketing and could even eclipse the all-time high of $1917.
To protect your financial future it is a shrewd move to invest in gold whilst prices are low. Precious metals always make profits when the global economy is in strife – and that could happen sooner than you think!