The Week In Hindsight, 04 April 2014

Gold responded positively to the under performance in US employment data on Friday after remaining under pressure for much of the week. This was as both investors and traders appeared to take the negative numbers, as well as Janet Yellen’s earlier comments, to mean that US monetary policy will remain loose for longer than the market currently anticipates.

After arresting dozens of Ukrainian nationals in Russia, raising Ukraine’s gas prices twice within a week, and given that 40,000 troops remain in place along the eastern border of the nation; Russia’s actions continue to be a cause of concern among western governments.

The air of tension that continues to surround Ukraine/Crimea will likely see gold remain supported at or above the $1300 level for the time being, however; once the crisis does begin to dissipate further, gold’s decline will be likely to continue. This is because the current missteps in US economic data are not significant enough to see the FOMC slow the pace of tapering.

Our view remains that both UK and US economies will grow at a faster pace during 2014 than last year and that the current sequence of backwards steps both nations have taken during Q1 will be reversed, then replaced with steadily improving data from the midway point of Q2.