Gold Prices Surge To Six-Month High Amid Weak U.S. Dollar
Gold prices recently soared to a more than a six-month high, surpassing the $2,000 per ounce level as a weakened U.S. dollar and prospects of a halt to U.S. interest rate increases boosted demand.
The price of spot gold increased by 0.5% to $2,012.33 per ounce, reaching its highest point since May 16 at $2,017.82. U.S. gold futures also rose 0.5% to $2,013.10, indicating a strong upward trend.
The dollar eased 0.1% against major currencies, floating around a more than two-month low last week. This made gold more affordable for holders of other currencies which resulted in increased demand.
Gold’s recent rally was attributed to “purely technical” factors, according to Craig Erlam, senior markets analyst at OANDA. He pointed out that the positive move was driven by the previous week’s U.S. inflation data and jobs report.
The current gold prices are well above their 50-, 100- and 200-day moving averages, standing just $60 away from August 2020’s all-time high of $2,072.49.
Investor focus has now shifted to the impending release of the revised U.S. third-quarter GDP figures on Wednesday and the PCE price index, which is the Fed’s preferred measure of inflation, on Thursday.
Furthermore, recent data indicating a slowdown in U.S. inflation has intensified expectations of an earlier-than-expected easing of monetary conditions by the Federal Reserve.
Considering this, traders broadly anticipate the Fed to maintain rates in December, while indicating around a 60% possibility of a cut in May next year, according to CME’s FedWatch Tool.
This anticipated decline in interest rates would diminish the opportunity cost of holding non-interest-bearing assets, usually resulting in increased gold prices.
In response to the surge in gold prices, other precious metals also saw significant increases. Silver rose 1.9% to $24.76 per ounce, platinum edged up 0.1% to $931.70, and palladium was up 0.9% to $1,078.56 per ounce.
The movement in gold and other precious metals is likely to shape up in response to economic figures coming out of the U.S. this week, particularly related to growth and inflation.
The current trends in the precious metal market raise the crucial question of whether gold will sustain its position above $2,000. Investors and analysts are keeping a close watch to see how the market develops under these economic conditions.