THE gold market spent the week reacting to weakness in the US dollar. The story of gold's price movement this week was also primarily a reaction to the news headlines that weakened the dollar. The other key theme was optimism that US lawmakers would agree on a fiscal stimulus package for the Covid-19 pandemic.
Early in the week, gold futures were boosted by dovish comments from the European Central Bank on the need for more stimulus. The benchmark Comex GC Dec 20 contract reversed higher after technical support around the US$1,850 held during Asia trading on Monday, as traders looked ahead to the first of the US presidential debates, and precious metals futures rose.
Although the chaotic debate turned out to be a financial non-event, it did highlight the uncertainties ahead as investors shift their focus to the US elections. Throughout the week, gold prices were pressured by the changing fortunes of the dollar and US 10-year notes. Gold prices finally rose above the US$1,900 handle on hopes that US lawmakers would finally agree on a new fiscal stimulus package. Hopes were however diminished as disagreement continued and gold prices fell back below US$1,900.
Central banks have started favouring other instruments rather than monetary stimulus. Gold was down about 4 per cent last month. Despite the recent pullback, we do see an upward trajectory for precious metals in the long term as central banks stick to dovish policies and real yields stay low. Global labour markets are weak and unemployment is expected to increase.
Source: News Formal (newsformal.com)
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