Gold Report JAN 27: How do Oil Scares Affect Gold Price?

Gold Report JAN 27: How do Oil Scares Affect Gold Price?


The precious metals complex experienced a
modest pullback earlier this week, as speculative paper positions initiated by traders late
to the game exited the markets amidst rising geopolitical tensions. Escalating violence
in eastern Ukraine added a measure of uncertainty that clouded the European Central Bank’s proposal
to artificially lift the eurozone’s economy, while the implications regarding the death
of Saudi Arabia’s King Abdullah and how it may affect OPEC’s stance on oil production
targets sent mixed signals to the commodity markets. In theory, gold is an excellent hedge
against economic variability and it should continue to do well on a long-term basis.
In the short-run, however, traders with a narrow time horizon, or the weak-hands of
the market, need to be flushed out in order for bullish investors to regain control. In
this transitional phase, corrective swings in gold prices should be viewed as an opportunity
to acquire additional positions at attractive discounts. Unfortunately, mainstream media outlets and
Wall Street investment brokerages continue to disperse distorted or conflicting information
regarding the precious metals sector. A recent example is Goldman Sach’s lowering their 2016
gold price estimate to 1,089 dollars, a nine-percent cut from their previous forecast, which cited
dollar strength and price deflation as a major headwind against the bullion market. However,
neither circumstance is likely to be sustained indefinitely as an overly strong greenback
risks the potential of a negative balance of trade, where imports outpace exports due
to unfavorable exchange rates, while price deflation fears have mostly centered on the
volatility of the crude oil market, a situation that could rapidly change based on Russian
or OPEC policy adjustments. Despite popular rhetoric, the U.S. economy can ill-afford
to dramatically raise interest rates or tamper with other critical metrics without upsetting
the entire financial system, thus negating the bearish arguments set forth by Goldman
Sachs. With so much chaos in our financial markets,
there will be a significant premium paid for stability. Gold has withstood all of the economic
disasters in human history, making it the ideal choice for a safe-haven asset. With
our affiliateion with Karatbars International, RealGoldMoney.com is able to provide an effective
solution to the hassles typically associated with securing gold. Instead of bulky bullion
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2 Comments

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