Gold May Pullback Further Down

The gold markets finally stabilised, with prices ceasing the fall which had been almost continuous over the previous two days. It was speculated by many gold observers and experts that the two-day plunge in prices had been caused by the markets’ uncertainty about the contents of a pending Federal Reserve meeting; it was expected that the central bank would take the opportunity of this meeting to formulate and ultimately decide on its fiscal policy for the next few months, and by so doing a layout for all to see its overall strategy.. The most likely expected outcome for the meeting, according to many observers, is that the Fed will take the first steps towards reducing the vast asset base which was accumulated to stimulate growth in the aftermath of the world financial crisis of 2008. This is a matter of interest for all of those who are concerned in financial matters in general, but it is of particular note to those who are interested i9n investing in gold. Normally the reduction of an asset base would not be good news for the price of gold, but in this instance, this may not be the case.

However, as was pointed out by among others analysts from Capital Economics, while the Federal Reserve had been completely open about its intention to make this happen, other factors might well act as balancing agent. These other factors are not necessarily ones which would lead to a settled state of mind in any observer who is interested in world peace in general! This is because gold has been performing well in light of the continuing tensions between the USA and North Korea. Times of uncertainty are, after all, traditionally those in which gold performs most strongly. Any reducing in tension, which would cause investors to sell their gold and try to find more conventional investments, has been stymied by the erratic behaviour of North Korea and also its newly acquired an alarming habit of firing missiles over America’s major ally in the region, Japan!

However by September a period of greater calm seemed to have ensued and investors were following their traditional course of moving away from the perceived safety of gold (along with the yen and also US Treasuries) and into the type of higher risk investments which are of appeal in instances when no-one expects a war to break out at any moment! Whilst this is good news for peace lovers in general and those who might be in the firing line in particular, it is not necessarily good news for the future price of gold. Possibly the forthcoming Fed meeting and decision will enable the gold market to at least gain some certainty about its immediate prospects. Whatever, as always, the price of gold remains ultimately connected to the prevailing state of anxiety, or as some describe it, the fear index!

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