Investors who trade gold have experienced a volatile market in recent weeks, as multiple events are pushing the precious metal in different directions. According to Businessweek, the strength of the stock market is pushing gold down.
The Dow Jones Industrial Average increased 0.6 percent – nearing a record – last month. Last year, gold slumped 28 percent with strong stock performance, so if stocks continue positive momentum, a similar decline could happen this year.
“The strength in equities is working against gold,” Phil Streible, a senior commodity broker at R.J. O’Brien & Associates in Chicago, told Businessweek. “There is very little interest in gold.”
However, recent comments by Fed chair Yellen forced gold up, as investors discovered that the bank is not in any hurry to reduce the size of its balance sheet, according to Reuters.
“Bullion’s inability to break over the 50-day moving average of $1,315 an ounce may have led to liquidations by disappointed investors,” James Steel, chief precious metals analyst at HSBC, told Reuters. “Weak prices near term may continue until geopolitical tensions or fresh physical buying halt losses.”
Another situation that requires close attention is Ukraine. Russia is currently pulling troops from the border, which could lead to deescalation in the area. However, there is no predicting what will increase tensions again. But, currently, Russia moving out of the region is putting downward pressure on gold, as investors are no longer seeking the safe haven provided by the precious metal.
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