The price of gold has climbed one percent above $2,000 per ounce on Tuesday, as the US dollar weakened to a more than two-year low. Analysts expect the bullion run to continue.
Spot gold rose 1.1 percent to $2,015 per ounce by 11:05 GMT, hitting a one-week high. US gold futures were up 0.5 percent at $2,007.60.
“The fragile currency environment and the weak economic numbers in the United States are stealing the dollar’s safe-haven appeal,” Vandana Bharti, assistant vice president of commodity research at SMC Comtrade, told Reuters. According to her, safe-haven buying in gold should continue given the amount of stimulus measures and an increase in Covid-19 cases.
On Monday, gold jumped as much as 2.4 percent, with a further push from Warren Buffett’s Berkshire Hathaway buying a stake in major gold miner Barrick Gold Corp.
Analysts say that after gold’s Monday rally, $2,000 an ounce will be the key level to watch this week as the precious metal appears to be entering a new consolidation period. “Tuesday will be an important day for gold,” Charlie Nedoss, senior market strategist with LaSalle Futures Group, told Kitco News, noting that last week’s selloff, while significant, was a healthy correction for the market.
He added that with a weaker US dollar and falling bond yields, he is not surprised that gold has made a strong comeback at the start of the week.
Traders are currently focused on minutes from the US Federal Reserve’s last policy meeting set to be released on Wednesday. Chief market strategist at financial services firm AxiCorp, Stephen Innes, said that “Traders are getting the last kick at the can ahead of the FOMC minutes where the view is for the Fed to have talked about YCC (yields curve control) or inflation-targeting which is bad for the dollar and good for gold.” Lower yields and interest rates decrease the opportunity cost of holding non-yielding assets such as gold.
Analysts also say that the rising geopolitical tensions between China and the United States (including Washington’s tightening restrictions on Huawei) are creating a win-win scenario for the precious metals’ markets.
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