Gold Slides as the Dollar Rises But Stays Above $1,900 on Virus Fears

Gold Ahead of Fed

The prices of gold went down again on Wednesday as the U.S. dollar continued its upward trend. The greenback rose 0.2% against a basket of rivals which made the yellow metal more expensive for investors using other currencies. But the bullion’s price decline was limited by concerns over global economic recovery from the COVID-19 pandemic.

Spot gold is currently trading at $1,922.66 per ounce as of 0905 GMT.

Margaret Yang, a strategist at DailyFx, said it was the dollar’s intra-day day rally that pushed gold down to a support price level of $1,910 an ounce.

Another factor weighing on gold are the signs of progress in U.S.-China trade negotiations. In a telephone dialogue, U.S. Trade Representative Robert Lighthizer, U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He reaffirmed their commitment to the Phase 1 trade agreement. The office of the U.S. Trade Representative said both sides are seeing progress and committed to ensuring the success of the deal. And the Chinese Ministry of Commerce confirmed that the dialogue was constructive and agreed to proceed with the implementation of the Phase 1 agreement. This development lifted the equities market and curbed the inflows of safe-haven investments into gold.

ANZ analyst Daniel Hynes noted that the easing of tensions between the two largest economies in the world dampened investors’ demand for safe-havens. But the precious metal remains supported by the lingering concerns over global economic recovery, the low-interest-rate environment and stimulus measures from central banks, he added. Other analysts agree that the overall price trajectory of gold is still positive because the near-zero interest rate around the world and the unprecedented release of money by central banks will force investors to continue to seek a hedge against possible currency debasement and inflation.

One positive development for gold is the Conference Board survey that showed that consumer confidence in the U.S. unexpectedly dropped to a six-year low in August.

Meanwhile, market participants are waiting for Federal Reserve Chairman Jerome Powell’s speech tomorrow at Jackson Hole. He is expected to clarify the central bank’s stance on monetary policy and inflation and how it will manage economic recovery from the pandemic.

In a related development, the largest gold-backed exchange-traded fund in the world reported yesterday that its holdings dropped by 0.3% to 1,248.87 tons.

 

Source – Gold retreats as dollar gains; all eyes on Powell speech