Gold prices are trading modestly higher today to end the trading week in quiet post-holiday type of trade. This past week has been relatively light with the New Years holiday on Wednesday. Frankly, it seems that many gold investors are likely thrilled that 2013 is behind them and that we are beginning a new year. It seems logical at this point to briefly discuss some things that could affect gold prices here in 2014:
The Fed:
While the FED may not garner the same attention it has for quite some time now, investors will continue to pay close attention to the economic data stream and any actions taken by the Fed. The Fed must walk a careful line here-for if they begin to remove stimulus too quickly, it could derail what seems to be a somewhat fragile recovery. Of particular interest will be the labor market and whether or not it continues to gain any traction.
The Greenback:
Obviously, the dollar index will continue to help or hurt gold depending on which way it is moving. After failing to stay below the key 80 level, will the DX be able to maintain current levels? Will the action by the Fed continue to boost the dollar? We shall see but as of right now the dollar looks poised for more upside which could be a negative for precious metals. On the other hand, a break below 80 could be significant for the gold bulls.
Physical Buying:
Physical buyers appear to have again stepped into the market here at year’s end. Looking at a long-term perspective, the last two years could prove to be nothing more than a dip in a longer-term bull market. Physical buyers tend to buy with the intention of holding for a long time also, and if they see what they think could be a bargain they tend to come out in numbers. We are seeing that to a degree right now, and it is quite likely attributable to the fact that thus far gold has held above the June lows as well as the fact that investors are currently in the process of portfolio re-balancing to end 2013 and begin 2014.
The Stock Market
The stock market appears frothy to more than one investor. Does that mean a crash is coming? No-not at all. The question is however, how much farther can this market go with the Fed taking its foot off of the gas pedal? There may come a time when investors start leaving the equities markets and start looking for alternative places to put cash to work. Needless to say, this could be a huge potential boost to gold.
Of course there are many other factors that will influence gold prices this year. The above are however, in our opinion, some of the major issues that will help shape the gold market this year.
