There has been a steady climb in gold (COMEX:GCJ14) prices during the past several days, blamed mostly on the Ukraine crisis, offsetting the downward movement of the recent, unexpected drop in Chinese exports.
Focussing on Ukraine, analysts everywhere are predicting which way things will go. Russia is still present in the Crimea and eastern Ukraine, and NATO is monitoring the situation from AWACS jets from nearby Poland and Romania. With the situation still tense, investors have looked to Gold as a safe haven, which may only be a temporary measure. As for the crisis escalating, Russia risks severing essential economic ties to Europe, especially at a time when the Rouble is already suffering, so Russia could stick to the negotiating table instead.
As gold prices are typically flat during March, we may see spot gold more or less plateau at current levels, at the most steady rises without any significant upturns in the market until May.
With regards to long term forecasts, Morgan Stanley has a negative outlook for 2014-15. While mentioning the positives of the Fed’s stimulus, also noted increased regulatory pressure on the financial sector and lowered Gold imports to India, counterbalancing strong demand from China. Goldman Sachs also feels that Gold’s recent performance will eventually turn negative, and as China has said it expects that Gold imports will reduce by about 17%.
However, Coutts are remaining bullish, citing rising incomes in China fuelling demand for luxury items such as jewellery. It could be that Chinese demand may act as a safety net against any sudden falls in the long term, and with the economic recovery continuing in the US and Europe, the market may yet be a little more confident overall; investors may steer away from Gold in favour of alternative investments. If the crisis in the Ukraine continues though, investors may continue to seek Gold as a haven investment, going forward, pushing prices up.