Contrary indications in the markets are sending confusing signals about the fate of the yellow metal. While the U.S. economy appears to be regaining its balance after a long period of uncertainty, the Eurozone question still looms large with some analysts predicting that Portugal may be the ‘new Greece’ in this equation.
Given the economic issues that remain still unresolved and the fluctuating values of currencies, there is some question among gold binary traders as to what the future holds as far as price movement of gold is concerned.
The Link between Currencies and Gold
Traders should note that with currency values remaining fluid, it is virtually impossible to pinpoint how gold prices will move. In general, when currencies appear unstable, gold becomes a preferred investment venue. However, in the beginning of this week, gold prices edged lower following a gain in dollar value. In fact, the U.S. dollar touched its highest point in a month in this period.
Still, the markets did not witness the kind of movement towards cash based assets that it would usually see in stable economic conditions. According to experts, many investors were holding back to ascertain that the dollar would be able to sustain its gains before they moved out of gold and into cash assets.
Gold Recovers Lost Ground
Later in the week, gold regained its lost ground as the Euro gained support against the dollar. While some Forex activity was seen, there was not enough to show that investors are fully confident about currencies. Also, the market is likely to be subdued until the outcomes of the Fed Reserve meeting come to fore. This meeting will decide the direction in which interest rates will move this year.
If the Fed appears inclined to support its low interest rate policy for awhile yet, investors are likely to move back into gold, pumping up prices in the process. However, the fate of Portugal and other Eurozone nations will also skew the dynamics and will need to be factored in to gain an idea of where gold will move in coming weeks.