Last updated on September 10th, 2020 at 12:17 pm
The prices of gold went down on Wednesday as the strength of the U.S. dollar overshadowed the impact of the lingering economic concerns. The greenback rose close to a one-month high against a basket of rival currencies and it made the yellow metal more expensive for investors using other currencies.
Spot gold is currently trading at $1,928.65 as of 0828 GMT.
One positive for gold today is the weakness in the stock markets triggered by a tech-led stock sell-off on Wall Street. It forced some investors to seek safe-haven assets. They use gold as a hedge against currency debasement and inflation.
OANDA’s senior market analyst Jeffrey Halley commented Asian traders are likely to be more cautious and wait for stronger evidence that the upward trajectory of the dollar and the sell-off in the equities market will continue. He added that if the dollar remains strong, a market correction can be expected which will send the bullion down to below $1,900.
Meanwhile, investors will be monitoring the policy meeting of the European Central Bank (ECB), scheduled on Thursday. They will be focusing on the central bank’s inflation forecasts. The ECB is not expected to make major policy moves because it has already aggressively rolled out stimulus to shield the economy from the impact of the COVID-19 pandemic. But despite the bank’s efforts, data showed that the Eurozone economy contracted at a record rate in the second quarter because of a sharp decline in consumer spending due to COVID-19 restrictions.
Market participants are waiting for the policy meeting of the Bank of Canada tomorrow and the U.S. Federal Reserve next week.
On the technical aspect of trading, Reuters’ analyst Wang Tao said he expects spot gold prices to retest a support price level at $1,906 an ounce. He added that if the precious metal goes down below this level, then it could fall to around $1,880.