Gold Slides to Two-Month Low as Dollar Gains Embolden Bears


© Reuters

(Bloomberg) — Gold fell to a two-month low as the dollar extended gains, while investors weighed comments from Federal Reserve officials on the need for more stimulus. Silver plunged after entering a bear market.

Bullion has retreated this week as the Bloomberg Dollar Spot Index climbed 2%. Hopes of further fiscal stimulus from the U.S. government before a contentious election are fading fast, as congress remains at loggerheads over any potential relief package. Virus cases continued to pickup in several nations, with France and Israel joining Britain in tightening lockdowns that could crimp the nascent economic recovery.

“If global growth concerns continue to push up the U.S. dollar, like we have seen this week, we could see some near‑term headwinds for the precious metal,” Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia (OTC:), wrote in a note.

Is Gold’s Big Rally Over? Here Are Five Key Charts to Watch

Gold has fallen back after hitting a record in August on massive stimulus programs, negative real rates and a weakening dollar. Morgan Stanley (NYSE:) expects the market to remain subdued until 2021, when rising inflation and a weaker U.S. currency could see the precious metal re-test $2,000 an ounce.

declined as much as 0.8% to $1,848.94 an ounce, the lowest since July 22, before trading at $1,853.08 at 11:07 a.m in London. for December delivery fell 0.7% to $1,854.90. Spot silver slipped as much as 4.8%.

Gold’s investment appeal over the summer was burnished as real treasury rates slid deeper into negative territory. Since early August, those rates have been almost flat, and it will take a significant boost to inflation expectations to drive them lower.

READ  Sainsbury's expands Chop Chop delivery service to 20 UK cities

“I think it falling back towards $1,800 an ounce is plausible,” said Marcus Garvey, a strategist at Macquarie Group (OTC:) Ltd. “If you look at gold versus real rates, it had materially out performed.”

Fed officials are sounding the alarm about the U.S. economic recovery. Chairman Jerome Powell told a congressional hearing that more support was likely to be necessary, while others were more full-throated, with Cleveland Fed President Loretta Mester saying it was very much needed given the “deep hole” the economy is climbing out of.

That support looks unlikely to come soon as stimulus talks are pushed to one side by the battle to appoint a new Supreme Court justice, following the death of Ruth Bader Ginsburg.

That’s a prelude to the upcoming presidential election, the biggest event on the precious metals horizon. Tensions continue to rise after President Donald Trump on Wednesday wouldn’t commit to a peaceful transfer of power if a tally of ballots shows victory for Democrat Joe Biden. Increasing political uncertainty will likely boost gold in the short term.

©2020 Bloomberg L.P.

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

READ  Oil prices drop on demand recovery fears amid U.S. virus surge

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here