The Week In Hindsight, 31 January 2014
After a short lived correction to the upside the previous week, gold came under heavy selling pressure again this week as the FOMC announced the decision to taper asset purchases by a further $10 billion dollars per month following their January meeting.
The metal had traded as high as $1270 per ounce last week as investors scrambled for protection against any potential fallout from an emerging markets crisis. The ongoing crisis however, never stopped investors unloading their positions back onto the market following the FOMC meeting minutes release on Wednesday evening.
The outlook for gold prices remains largely unchanged at present. Prices could see some upside subject to the development of the emerging markets story, however; it is unlikely that this will translate into any significant gains. We feel that the situation in the affected corners of the globe would need to deteriorate substantially from here for this to prove incorrect.
This is as growth expectations for the developed world remain positive while any deterioration in the junior markets would likely prove to be of benefit to the bottom lines of many western companies.
For these reasons we foresee investment demand remaining muted with price gains capped at the $1290 per ounce level.