Gold closed on Friday up almost $11.00 at nearly $1252 per ounce on the COMEX exchange, with the contract for February delivery closing up slightly but firmly on the week. The final week’s price reflected the highest gold levels since early December of last year, as the yellow metal continued its impressive rise above the solid $1210 support level and looks to climb above $1250.
Weaker domestic economic data added to the strength in the price of gold, as new American home construction building permits declined in December and January. Consumer sentiment took a slight hit as well. The issue at hand regarding this economic data is whether the Fed will or will not have the ability to taper the quantitative easing program, and if they are forced to cut back on tapering how that inflationary pressure will impact the price of gold. As one would expect, inflationary activity will have a natural upward impact on the price of gold – the Fed’s ability to taper through a reduction in their monthly bond purchases is considered less certain now, and if that tactic is removed as an option the resulting increase in money supply should bump gold prices even higher.
Other factors in the rise of gold above the $1250 level were the decline in U.S. stock prices for the week and some late weakness in the U.S. dollar, which fell from its highs on late Friday afternoon. With the Fed having taken its first small steps in cutting back on monthly bond purchases, a good chance exists that selling pressure on gold will slow down and that the worst of the relentless selling pressure that we experienced in 2013 may be a thing of the past. Gold rising above $1250 is a welcome sight, and as long as the price is able to maintain above the $1210 support level we should be looking at solid gains in the near future.
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