Special Report from Money Morning
by Diane Alter, Money Morning
Gold prices have continued 2014’s climb, with a boost recently from U.S. Federal Reserve Chair Janet Yellen.
In morning trading Thursday last week (27 February), April gold rose $7, or 0.6%, at $1,335. Spot gold was flat at $1,330.20.
Early last week, the yellow metal hit a four-month high of $1,339.09 an ounce. On Monday (03 March) that number was taken out as the April futures contract closed near $1,350.
SPDR GOLD TRUST ETF
Gold inched higher a week ago after Yellen mentioned today in testimony to Congress that there’s been some recent weaker U.S. economic data. Traders took that to mean the central bank might be less aggressive in winding down its quantitative easing program.
The impact of the Fed’s decisions to scale back its bond-buying program, which has been a catalyst for gold, has put many precious metals traders on hold for months. Gold responded to mere rumblings of a Fed taper last year with big drops. Indeed, the yellow metal lost 28% in 2013, logging its first annual loss in 13 years.
But gold has steadied after that plunge.
Up $140 an ounce since the start of the year and on pace for its second month of solid gains, gold is easily outshining year-to-date performances of the three major benchmarks. Year to date, gold prices are up a stellar 11%. Meanwhile, the Dow Jones Industrial Average is down 2.3%, the S&P 500 Index is off 0.2% and the Nasdaq is up a modest 2.8%.
International private bank Coutts recently said gold is the best performing asset class of 2014 so far.
And it’s not just the Fed driving gold prices higher this week.
Gold Price Drivers This Week
Driving gold prices Thursday last were continued doubts about the state and the pace of the U.S. economic recovery. A string of soft economic data, from retail sales to manufacturing to an uptick in weekly jobless claims, rekindled interest in the alternative asset.
Thursday’s (last) Federal Reserve Bank of Chicago’s National Index for January, which measures the country’s economic activity, came in at minus 0.39. Analysts were looking for minus 0.2. A below zero reading is indicative of below-trend growth.
Also pushing gold higher was speculation the turmoil in Ukraine will boost demand for the safe-haven precious metal. Amid issuing an arrest warrant for fleeing ex-President Viktor Yanukovych, Ukraine’s interim government reported the ailing country need $35 billion of financial assistance to avoid default.
Ukraine’s currency, the hryvnia, fell to an all-time low against the dollar on Tuesday as concerns mount that the country won’t be able to pay its debts after Russia suspended its planned purchases of Ukrainian bonds as part of a $15 billion aid package agreed upon in December.
Kitco senior analyst Jim Wyckoff, told MarketWatch.
“If the situation escalates it would put even more risk aversion into the world market place, which would likely be bullish for gold“.
Ukraine’s finance ministry is seeking a loan from the United States and Poland. Within the next week, the struggling nation will hold an international donor conference with European Union member states, the United States, and representatives from the International Monetary Fund (IMF) for aid in implementing reforms in the Ukraine.
The critical situation in the Ukraine, combined with political unrest in Thailand, Venezuela, and Egypt, has lured investors to gold, which becomes especially appealing in times of geopolitical unrest.
NOTE: To get the full story of where gold prices are headed in 2014, here’s our Global Resources Specialist Peter Krauth on 1,600 Reasons to Buy Gold Now
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