Gold was pulled in many different directions this week, facing economic cues such as the strength of the U.S. dollar, the European Central Bank’s latest activities, and a new jobs report. While gold is facing volatility, it’s important to remember that gold functions best as an asset you purchase and then leave alone for several years, knowing that it will always have intrinsic value no matter what is happening in the world. There is no perfect time to buy or sell gold, so rather than waiting to buy gold, buy gold and wait.
American entrepreneur and motivational speaker Robert Ringer once said “Start buying gold now, regardless of the price. By acting now, you will not have to react when it’s too late. Too late will be when the majority of the public finally figures out what is happening to paper money and frantically tries to get aboard. Remember, if you’re one of the ones holding paper in the end, you will have given away your products and services for nothing.” -Robert Ringer
Dollar Rally and Ukraine Crisis Weigh on Gold and Palladium
On Monday, gold and palladium fell as a stronger U.S. dollar outweighed the geopolitical conflict in Ukraine. The Wall Street Journal pointed out that since gold and palladium are traded in U.S. dollars, they become more expensive for those using with foreign currencies whenever the dollar strengthens against other currencies. In Ukraine, Russian military forces were spotted in both of the major rebel-held cities in eastern Ukraine (Donetsk and Luhansk) as well as other places, prompting Ukraine to declare it is now fighting the Russian army as well as Russian separatist forces. However, the dollar hitting new highs apparently spoke louder to investors.
Seasonal Demand: Why is September Important for Gold?
September has historically been a good month for gold. Why is this? It may seem odd, since gold is not a food crop that has seasons. However, gold has strong cultural value as well as monetary use – in countries such as India and China, gold is used as decoration and a display of wealth during holidays, festivals, and ceremonies such as weddings. Diwali, the Hindu “festival of lights” in which Indians purchase various gold and silver articles, is coming up in October. Christmas comes next in December, followed by Chinese New Year in late January/early February. Jewelry manufacturers often stock up on gold in anticipation of these events. Gold is facing other economic pressures that are limiting its gains right now, but seasonal demand may prove to be helpful.
Gold Gets Boost from U.S. Jobs Data; ECB Making Moves, Dollar Still Strong
Gold for December delivery traded higher on Friday morning by 0.3% at $1,270.20 an ounce after the latest U.S. jobs data was released by the Labor Department at 8:30 a.m. EDT. It was at $1,264 just before the numbers were released. Economic cues were mixed for gold, as the U.S. dollar hit a 13-month high against 10 major currencies, the European Central Bank cut interest rates to a record low and announced a new stimulus program, and the latest U.S. jobs data did not meet economists’ expectations. The dollar’s continued rally seemed to boost gold, but the other cues limited its rise.
While gold may still be trading below its former resistance level of $1,300, it’s important to remember that gold is not a product investors turn to in attempt to get rich. Considering its day-to-day volatility, gold functions best as an asset you purchase and then leave alone for several years, knowing that it will always have intrinsic value no matter what is happening in the world. If you’d like to start protecting your assets with gold, call American Bullion at 1-800-326-9598 to speak with a precious metals specialist about buying gold for cash delivery or even purchasing it using your retirement account.