The significant relationship between actual or real rates and the prices of precious metals especially gold persisted into 2013 as gold continued its role as leverage against real rates. The situation that evolved in 2012 has become a primary determinant or driver towards the performance of gold. The relationship persisted into 2013 despite aggressive gold buying by major gold consumers such as India and China and central banks stock piling gold. The triangular pattern that broke out indicated a gold rally for 2013.
These ‘triangles’ have been observed in other commodity markets, however investors failed to spot the ‘second wave of resistance’ as gold refused to budge further after peaking at 1,800 dollars per troy ounce.
The fact that gold was not able to clear the 1,800 mark and instead dipped to about 1,523 dollars per troy ounce indicated the strengthening of capital markets and the value of the dollar. As suspected, gold prices were expected to slide to 1,400 by the end of 2013. Although gold started off at 1,671 dollars per troy ounce at the beginning of 2013 by the end of the second quarter prices had dipped by 300 dollars per troy ounce to 1,342 dollars per troy ounce.
This triggered a buy in the market that saw prices surge to slightly above 1,400 dollars per troy ounce before market pressure brought it down again to 1340 dollars per troy ounce in October 2013. 2013 was the year that the world witnessed gold fall from grace as by the end of the year prices of gold on average in December that year was 1,214 dollars per troy ounce a far cry from what it was at the beginning of the year.
Although most market players were expecting prices to remain at that level over the next year, in January 2014 gold prices became volatile with average fluctuation levels of 60 dollars making it a playground for ‘quick gain’ market speculators.