Recent weeks have shown strong rallies for precious metals and its looks like ass id prices are now consolidating. There may be a pull back in prices over a strengthening U.S dollar, but the rebounds since mid-December show that the sentiments for precious metals, especially gold, has turned more bullish. Once again the yellow metal has found place in an investor’s kitty and these commodities are back in vogue again.
Last week we saw gold prices rising during Asian trading hours on Thursday, 11th Jan after the dollar continued to drift lower following news that Chinese officials have recommend the country slow or halt its purchase of US bonds.
The yellow metal benefited for reasons more than one over the past week and its effect continued to spread in the current week too.
- The important data that weighed on the dollar and other global news that benefited the yellow metal-
- The December produce price index fell 0.1% against an expected increase of 0;2%
- Unemployment claims rose to 261,000 in the past week marking the 4th consecutive weekly increase and a more than three month high.
- The dollar remained soft after important news was released from China regarding US bind purchase on Thursday. This kept the dollar on the defensive which ultimately benefited the yellow metal.
- hawkish language contained in the ECD December meeting minutes pushed gold prices further on Friday
- What added to the rally was a soft US data that released on Friday. This weighed on the dollar and pushed gold prices higher.
- A disappointing US data further raised negative sentiment for the dollar. The weak dollar amidst increased demand for equity market hedge has made the environment even more glitter for the shining metal.
- Adding a touch of bullishness to gold was data from the U.S. Commodity Futures Trading Commission on Friday, which showed hedge funds and money managers raised their net long positions in COMEX gold and silver in the week to Jan. 9.
- S. President Donald Trump on Friday delivered an ultimatum to European signatories of the deal to fix the “terrible flaws” in the agreement with Iran, or the United States would pull out.
- Iran’s president said on Sunday the United States had failed to undermine a nuclear deal between Tehran and major powers, and hailed the accord as a “long-lasting victory” for Iran, state television reported
A weaker U.S. currency makes dollar-denominated assets such as gold cheaper for holders of other currencies, while higher rates could dent demand for non-interest-paying gold.
The global spill over effect was seen in the domestic markets too. In the national capital, gold of 99.9% and 99.5% purity advanced by Rs100 each to Rs30,750 and Rs30,600 per 10 grams, respectively — levels last seen on 18 November.
Apart from positive global cues, buoyed by a slump in the dollar, sustained buying by local jewelers at the domestic spot market kept gold prices elevated.
Summing it up, gold has moved up sharply in dollar terms in the past few days despite mixed economic data out of the USA. So gold investors should treat the latest rise in the gold price purely as a wealth protection exercise. That is what gold is good at over time. If the dollar declines further then gold will rise further, as will all the major precious metals – and most other commodities too.