By Francis Ogwo
Gold prices has dropped further making it heaviest in two months even as the U.S. dollar goes stronger.
Experts say it stems from metal traders weigh of President-elect Joe Biden’s pledge in boosting the economy of the United States.
This implies that the rise of the U.S dollar has impacted heavily on global demand for gold. This has seen global investors moving from stocks to the more risk-averse asset. A stronger U.S dollar makes the yellow metal more expensive for holders in other major currencies.
Gold’s previous gains in Q4 2020 are getting overturned as a surge in U.S Treasury yields soften the appeal of the non-interest-bearing asset (gold).
Also, as COVID-19 vaccines get rolled out, global investors are weighing up the safe haven’s asset prospects for this year, amid reports that more massive support is on the way, which could help gold bugs in keeping prices above $1,850/ounce.
A recent view from Stephen Innes, Chief Global Market Strategist at Axi, stated that: “The US dollar’s recent gains, higher yields, and the equities rally is keeping gold on the defensive.
“The gold market spends most of Friday aggressively trimming longs with little support down until $1825/oz.
“Naturally, stop-loss selling on the way down as buying interest from the real money community has lacked in any meaningful way this year which runs counter to seasonal norms.”
