The Week In Hindsight, 23 May 2014

Gold saw a volatile five days of trading this week as the metal was repeatedly beaten back from the $1300 mark following several attempts to pare losses from earlier in the month. Wednesday’s FOMC minutes acted as the catalyst for its final attempt when policy makers appeared to discuss options for all possible outcomes for the economy.

On one hand policy makers appeared to acknowledge that they would be comfortable with easy policy for a longer period should it become necessary. This was followed by comments that sought to play down the inflationary risks of such a pursuit.

On the other hand, policy makers underwent an exercise in “prudent planning” by discussing the technical aspects relating to the eventual situation where the central bank will have to begin to raise interest rates.

In the face of uncertainty the metal headed for high ground, further supported in its push northward by news from India which indicated that the government was planning to alter import restrictions on the metal.  

Although our long term outlook remains that we see prices experiencing substantial difficulty in remaining at or close to the current level, we cannot rule out further moves to the upside while geopolitical tensions remain high and civil unrest continues to dominate in Ukraine.

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