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(Kitco News) – A weaker US dollar and ongoing global growth problems due to the COVID-19 pandemic help the gold market recover from last week‘s losses.
Gold‘s rollercoaster ride continues with December gold futures riding more than 1% early at the start of the North American trading session. December gold futures last traded at $ 1,978.20 an ounce. Monday‘s rally comes after last week‘s red, who saw gold‘s worst weekly performance since March.
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North American stock markets are seeing a relatively neutral open with the Dow Jones Industrial Average starting the week with 5 points.
A strong positive for the precious metal continued to sell pressure in the US dollar index, which hung close to its two-year low, last trading below 93 points, down 0.15% on the day. Some analysts see potential for further loss in the US dollar over the full term.
“ [The U.S. dollar index] is down four straight days and the time below 93.05 sets a test from last week‘is low at 92.52, ”said currency analysts at Brown Brothers Harriman.
Along with a weaker US dollar, analysts say gold is also seeing some renewed demand for safe haven after disappointing economic news from Asia. Yesterday, Japan said that because of the coronavirus in the second quarter, its economy grew by almost 28%, the worst decline in history.
The gold market pressed after a session high in delayed response to weaker than expected factory numbers in the US. The New York Federal Reserve said its production survey Empire State‘The general business conditions index fell after a reading of 3.7 in August, down from July‘s reading of 17.2. The data were weaker than expected with consensus forecasts requesting a reading at 14.6.
While the U.S. dollar and demand for safe havens provide some momentum for gold, some analysts have said profits may be limited as U.S. interest rates start the week higher. Yields on the US 10-year bond are currently trading at 70 basis points, holding close to a one-month high.
“The recovery in U.S. yields should curb the appetite for the yellow metal, as investors now question whether there is potential for sustainable gains above $ 2,000 per oz. Given the mixed feelings, gold could not be a go-to hedge in the event of renewed pressure on risk-off across the global markets, ”said Ipek Ozkardeskaya, market strategist at Swissquote Bank SA.
Although gold prices are seeing solid gains, some analysts think the market is still testing critical resistance levels. Analysts at City Index said that unless gold prices pushed back above $ 2,015 an ounce, it would remain in a consolidation phase.
Commodity analysts at Commerzbank said they also see potential for gold prices to enter a consolidation phase.
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