Investors Still Seeking The Precious Metal As A Safe Haven.
Investors are beginning to show signs of optimism in the U.S. economy and this has decreased the demand for physical gold as a safe haven.
According to Bloomberg, U.S. retail sales rose in February for the first time in three months, and jobless claims unexpectedly fell last week to the lowest since November. The release of these numbers played a big role in gold futures falling from their six-month highs.
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So far in 2014 gold had been steadily climbing, reaching its peak when tensions between Russia and Ukraine began to escalate last week. Even though the Russia/Ukraine situation is far from settled, the release of this positive economic data was enough to make investors back off of their gold demand.
“The market is reacting to today’s U.S. data,” Alfonso Esparza, senior currency analyst in Toronto at Oanda Corp., said in an interview with Bloomberg yesterday. “The Ukraine situation is still very volatile, so any news out there could push gold higher.”
Even though gold futures fell off their six-month highs yesterday, spot gold did trade up 0.10% in the open market, finishing at $1,371.90 an ounce. This shows that investors are still seeking the precious metal, despite the positive news. There are some experts, however, that are worried that the drop in futures prices could signal an upcoming correction.
“Amid concerns about the Chinese economy and the geopolitical tensions between Russia and Ukraine, gold is clearly still in demand as a safe haven,” analysts at Commerzbank AG wrote in a report obtained by Bloomberg. “The price increase has also been driven by speculation, giving rise to further correction potential.”
As usual, any negative economic news and/or escalations in tensions between global powers are good signs for the price of gold. The volatility in the markets and the world seem far from over.