With just a few days left of 2014, the price of gold is inching higher as the United States dollar weakens and the Asian economies continue to increase their purchases of the yellow metal. It appears that gold will end the year similar to how it started.
During the Monday trading session, the price of gold shot up 0.5 percent to just under the important $1,200 threshold. This is welcoming news for goldbugs considering that the precious metal has fallen two percent in the past week.
Furthermore, once oil prices start to shoot up again, this will increase demand and the price for gold. Also, Chinese consumers have been ecstatic over gold as local prices were at a premium price of $3 before slipping to a little more than $1. Demand could skyrocket over the next couple of months due to festivities in many of the Emerging Markets, including China and India.
However, experts warn that it may not all be roses for gold moving forward because economists expect the Federal Reserve to raise interest rates in the second quarter of next year and anticipation that the greenback will rev back up after a mild, short-term slump.
“The bullion market faces tough upside resistance and further gains may be an uphill battle,” said HSBC analyst James Steel in an interview with Reuters. “A strong U.S. dollar and the likelihood of higher U.S. rates even if inflation remains subdued are a recipe for lower gold prices.”
As we reported, the Fed may hold off on hiking interest rates from the present near zero. Although a bulk of economists are confident in this move, there has been a decrease in the consensus, and even many Fed officials have hinted that it may not occur in the new year because of a difficult labor market and a lack of core inflation.
Remember, the market is maintaining the word “caution” when it comes to next year’s Wall Street performance. This is the first year in a long time that the Fed will not be injecting monthly stimulus into the markets so it’s no wonder why traders are being cautious. Is QE4 coming?
Who knows? Perhaps 2015 will be like 1999, a time when the dot-com bubble collapsed.
At the time of this writing, gold is trading at $1,180 while silver is just under $16 per ounce.
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