Gold, like any other precious resource, has a value that can be affected by certain factors. One of them is geopolitical news.
This is what happened recently when the gold price trend was shaken up by ongoing conflicts in Iraq. US President Barack Obama released an announcement that he is planning to send 300 military envoys over to the said Middle East country in its effort to assist in fending off Sunni militants who have overrun or captured large parts of Iraq.
Obama Sends Kerry To Middle East
Instead of going sideways along the range of $1250 to $1275 (per ounce), as predicted by precious metals trading expert Robin Bhar, the spot price of gold per ounce closed at $1314 while that of gold futures settled at $1314.10 at their highest points.
Geopolitical news might be a major contributing factor but it is not enough to push the precious metal’s price even higher as gold price rallies can be capped by macroeconomic improvements, as Bhar also stated. And the recent increase in value might be short termed and gold’s good fortune may not last that long, according to analysts.
The value of the American dollar is also one of the important gold price factors. The recent fall of the currency to one of its lowest levels in the last couple of months, also helped push up the price of gold. This was triggered by the Feds suggestion of more aggressive interest rate increases which will start next year. This means that there won’t be any rise in interest rates in the near future but if they do, they will still be at low levels.
These two factors might have given the price of gold a good jump-start but questions are being raised by investors and trade analysts whether this positive run will continue. As it appears, the price of gold might already be overdone. Fortunately for investors and strategic buyers, gold is doing alright and has gone down only very slightly as indicated on published precious metal news.
Trade financing scams can also affect the value of gold as what happened when fake deals were exposed in China’s gold bullion imports, deterring investors and traders.
Gold imports are coursed through Hong Kong into China, which is the world’s largest consumer of the precious metal. Records show that 52 tons of have been routed to the country, net of exports, in May. This is the lowest amount since January of 2013, as import of gold bullion was down by over 20% month-on-month.
Linked to the copper trading scandal, the auditor general of China has uncovered fictional trades valued at up to $15.2 billion wherein gold bullion is being used as collateral for loans since 2012.
Investigations are still ongoing at Qingdao on who really has rights to the pledged metal. These scandals have led to significantly reduced Chinese demand for copper and gold imports. This can make investors reluctant to be involved in financing deals until authorities have cleared the situation.
When these gold-backed financing deals are scaled back by banks, it might lead to reduction in imports and trigger sales in order to repay the lenders. The report from the auditor general of China indicates there are currently 25 companies that have falsified loans against gold collateral. These gold processing companies made profit by investing the borrowed money offshore at much higher interest through what is called ‘idle arbitrage’.
Currently, the import of gold bullion into China has flat-line as stated by the commodities unit of the Standard Bank. And unless the gold bullion prices drop very soon, demand from China and the whole of Asia, might not increase.
The news mentioned above are factors that can affect what are gold prices currently. Given the scarcity of this precious metal, it’s no wonder that slight changes in geopolitical and trading status of gold can lead to major jumps or slumps in the value of spot gold, futures gold, and also gold bullion.
For those who are investing in gold through brokers and agents, it is also worthwhile to monitor current events that are likely to affect pricing in order to be able to decide whether it’s time to jump ship or load even more. It will likely decide whether to lose or win in the gold trading wars.