Why Gold Prices Are Down Today

Gold prices are down $0.90 today (Friday) to a spot price of $1,322.10 an ounce and are down to finish the week after reaching $1,332.10 per ounce on Tuesday.

Meanwhile, the Dow Jones Industrial Average climbed nearly 41 points in early trading today.

gold prices 2014

Gold was higher this week - Tuesday's price was the highest for the precious metal since Oct. 31. Gold prices were up more than 4% last week alone - the largest weekly gain since August 2013.

Gold prices reached three-month highs in February due to soft economic data out of the United States. That had analysts speculating that the U.S. Federal Reserve might slow its tapering measures.

U.S. unemployment numbers reported on Thursday were stronger than many expected, lifting the U.S. dollar and bringing gold prices back down to where they are currently. According to the weekly jobless claims, fewer Americans filed for unemployment benefits.

Additionally, the research firm Markit reported that U.S. manufacturing activity posted its fastest growth rate since 2010.

"The news during the week has been mixed," Ole Hansen, head of commodity research at Saxo Bank told Reuters. "Traders who filled their boots on the break up are now getting a bit nervous. The risk into next week is that we may need to check the strength of support, as any additional buying from these levels would need an even."

Another factor pushing gold prices down from their Tuesday high was weak manufacturing data released from China. Factory activity in the country was at a seven-month low, prompting worry that the world's top gold consumer may be headed for an economic slowdown.

It was strong Chinese economic data coupled with U.S. economic concerns that pushed the price of gold higher in early February. When both of those trends reversed this week, gold prices pared back.

Even though gold prices have settled back down to end the week, there are still bullish indicators for gold in 2014...

Why We're Bullish on Gold

Gold prices dropped 28% in 2013, a huge reversal of a decade-long trend in which they rose every single year from 2001 through 2012.

Money Morning's Global Resources Specialist Peter Krauth sees numerous bullish signs after 2013's gold sell-off.

First, gold miners saw smaller profit margins in 2013, causing many mine companies to shutter their unprofitable operations. Naturally, when the number of mines is diminished, so too is the gold supply.

"Mines are being put on care and maintenance, seriously cutting into gold production worldwide," Krauth said. "Evy Hambro, who manages BlackRock Inc.'s $8 billion World Mining Fund, said gold supply could fall 'quite rapidly' as producers restrict output at higher-cost mines."

Krauth also points to slowing mine expansion and the production of higher-grade ore as factors that will continue to push gold prices in higher in 2014.

According to Krauth, a little bit of volatility should be expected, especially after a down year in 2013. However, numerous bullish indicators remain.

"[Will gold prices] go straight up? Unlikely, since nothing goes up in a straight line," Krauth said. "So we can expect continued volatility in the gold price this year, with some risk for lower prices, but a strong bias to the upside."

"I think we're likely to see gold close the year higher than where it started."

How high do you see gold prices going in 2014? Does this week's pullback scare you? Tell us on Twitter @moneymorning using #GoldPrices.

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