The Week In Hindsight, 11 April 2014
Gold closed out its second week of gains on Friday following a multi session sell off in global equities which saw valuations in the tech sector driven by increasing scrutiny on valuations in the tech sector and ongoing concerns over Chinese growth.
Another victim of the sell off was the resources sector which once again came under pressure following the release of Chinese CPI figures for March. Under performing against National Bureau of Statistics forecasts, the actual figure indicated that consumer prices and economic conditions may have declined faster than expected throughout the month.
The pressure upon equities was further compounded over the week as separatist protesters seized control of government buildings in the east of Ukraine, demanding that the region be granted a referendum similar to that which took place in Crimea.
The fresh unrest was followed closely by threats from Vladimir Putin to cut off the nation’s gas supply unless the Ukrainian government was able to clear a $41 billion unpaid bill. The uncertainty surrounding Ukraine continues to ensure that geopolitical risk considerations remain a relevant factor in investors decision making, while stretched valuations and the transitioning of western markets into a period of withdrawing stimulus are likely to continue to see investors remain on edge for the time being.
As a result, gold is likely to remain biased toward the upside over the coming week at least, with a return toward $1340 mark the most likely outcome for the next five days.