The prices of gold went up on Monday because of a weaker U.S. dollar and market expectations that the Federal Reserve will continue its dovish monetary policy.
The greenback fell 0.2% against a basket of rival currencies that made the yellow metal less expensive for investors that use other currencies. In its policy meeting on September 15-16, the Fed is expected to keep interest rates low for a longer time and that would be supportive of gold.
Spot gold is currently trading at $1,946.03 per ounce as of 0806 GMT.
Gold’s advance was somewhat limited by the resumption of the phase 3 trial of AstraZeneca’s COVID-91 vaccine that was developed with the University of Oxford. The news boosted the demand for riskier assets and lifted the Asian stock markets.
AxiCorp’s chief market strategist Stephen Innes commented that the Fed might not make any policy changes and this might result in inflation. This would drive the demand for gold because it is often used as a hedge against currency debasement and inflation.
OANDA’s senior market analyst Jeffrey Halley added that the longer-term fundamentals of gold remain the same. He also said it has a support price level between $1,900 and $1,920 and a resistance price level at $1,970 an ounce.
Meanwhile, market participants are also waiting for the release of the policy decisions of the Bank of England and Bank of Japan, both due on Thursday. In Europe, Central Bank president Christine Lagarde said that countries in the eurozone area need to continue to spend heavily to support the bloc’s recovery from the historic recession due to the pandemic.
In physical trading, Indian gold dealers offered discounts for the fourth consecutive week as the demand from retail consumers remains low.
In a related development, market speculators raised their long position in the bullion to 154,629 contracts for the week that ended on September 8. Also, the largest gold-backed exchange-traded fund in the world SODR Gold Trust reported that its holdings dropped by 0.4% to 1,248 tons last Friday.