Gold, having rallied convincingly from the beginning of the year until mid-March, has given back half of those gains and looks to be testing the loyalty of the gold bulls.
The beginning of the week had seen the G7 nations, led once again by the US, impose fresh sanctions against a number of prominent Russian business men and a few companies. The tactic appears to be squeezing those that Vladimir Putin surrounds himself with, and they in turn will squeeze him into some action. This is, of course, a strategy that will take time to work its way through and, subsequently, some of the fear over Russian retaliatory measures has been eased.
Last night in the US the Federal Open Market Committee cut a further $10 billion from its monthly debt purchasing scheme, and this took Janet Yellen one step closer to being in a position to increase interest rates. With returns for holding cash kept low because of the levels of the US base rate, the lack of any income that holding gold affords has been less of an issue for investors. It now appears that this might not be the case in 2015.
In the short term, as long as gold can keep closing above the $1278 level, we will be looking for a bounce to climb back up to the $1320 level.