This Week in Gold, and Argentina’s Default


This week in gold was full of economic news that investors then reacted to in markets far and wide. The data on the U.S. economy was mostly positive, but not without caution. Meanwhile, Argentina has defaulted on its debt, sending markets into a tailspin. Geopolitical tensions have also been weighing on the precious metals market, with the Russia/Ukraine saga continuing and the crisis in the Middle East involving Israel and Gaza, prompting investors to hold onto their gold for the time being.

Argentina’s latest default is not its first – since the early 1800s, it has happened eight times. In the latest one, the country had been battling with U.S. hedge fund Elliott Management, and talks between Argentina and U.S. creditors late Wednesday over a missed debt interest payment led to Argentina defaulting for the second time in 13 years. In response, on Thursday Argentina’s Merval Index fell by 8.4%, which is equivalent to a 1,400 point drop in the Dow Jones Industrial Average. Here in the states, the Dow sank 317 points, its third-largest daily drop this year. The S&P 500 lost 2%, and the Nasdaq lost 2.1%.

Below are the other stories we covered this week.

Gold in 2014: What’s Next?

An article titled “At the Crossroads: Gold in 2014″ from the February/March issue of American Hard Assets magazine outlined what gold is facing in 2014 and where it may go from here. The author points out that “Though 2014 may be the hardest year in recent history for gold forecasting, there are some significant points on which we can achieve some clarity,” namely the principles of supply and demand. See our recap of the article’s forecasts for gold’s supply and demand in 2014 and where it may be headed for the remainder of the year.

Investors Weigh Latest U.S. Economic Data Against Geopolitics

Gold fell from a one-week high on Tuesday but was little changed on Wednesday as investors had to weigh signs of an improving U.S. economy against geopolitical tensions in Russia/Ukraine and the Middle East. Geopolitical tensions have helped gold gain 8.2% this year, and in this case they limited the downslide gold usually sees after positive economic data is released. Overall it is an interesting time for gold with multiple factors at play.

Federal Reserve Holds Two-Day Meeting

On Tuesday we gave a preview of this week’s two-day Federal Reserve meeting, which concluded on Wednesday.  An article in Money Morning suggested investors keep an eye on “the two I’s”: interest rates and inflation. On Thursday we outlined the Fed’s official statement following the meeting, which announced continued tapering of its bond-buying program (also known as Quantitative Easing or QE), citing an improving U.S. economy. This was in line with expectations, as the Fed had previously stated it would continue with its original plan provided the economy keeps showing signs of improvement. The statement acknowledged that GDP grew more than expected in Q2, unemployment (now at 6.1%) has been falling, and inflation has moved “somewhat closer” to the Fed’s target rate of 2%. Fed chairwoman Janet Yellen was not completely satisfied with the employment numbers, however, cautioning that “A range of labor market indicators suggests that there remains significant underutilization of labor resources.”

It is an interesting time for gold with multiple factors at play that investors must grapple with. As the U.S. economy improves, gold becomes less attractive as a hedge against inflation, a weak dollar, and other economic crises. However, geopolitical tensions are causing investors to hold onto their gold as a safe-haven asset. Regardless of the state of these factors, owning physical gold that cannot be printed or manipulated by any government gives peace of mind when the world feels as though it is spiraling out of your control. Call American Bullion at 1-800-326-9598 to speak with a specialist about adding physical gold or other precious metals to your retirement portfolio by opening a Gold IRA. Harness the power of gold to protect perhaps your most important asset: your financial future.