In recent weeks, the dollar has been regaining strength which, in turn, resulted in falling gold prices. However, gold prices steadied in a tight range on September 22, 2020, as fears over the rising COVID-19 cases throughout Europe countered pressure from a stronger US dollar ahead of critical speeches by Federal Reserve policymakers this week.
Spot gold was up about 0.1% at $1,914.28 per ounce by 0431 GMT. It had dropped by over 3% to reach $1,882.70, its lowest level since August 12 on Monday. The US gold futures gained 0.5% to reach $1,919.70 on Tuesday.
Earlier in the day during the Asian session, a stronger US dollar cracked gold’s appeal, with the dollar index holding onto its overnight gains against its rivals. A stronger dollar makes bullion more expensive for the holders of other currencies. Gold is more sensitive to the US dollar as opposed to any other factor.
But gold was underpinned by worries about fresh lockdowns in Europe which has reported another surge in virus cases. Doubts about a quick economic recovery also kept investors away from the riskier assets. One expert said:
“In the near-term, gold may struggle to hold gains above $1,900 … If it breaks down $1,900 it may open more room to the downside towards maybe $1,870.”
Investors now turn to speeches by various Fed committee members, including Chairman Jerome Powell, who is scheduled to appear before Congressional committees later this week. Avtar Sandu, a senior commodities manager at Phillip Futures, said:
“Central banks would continue to have major concerns about economic growth. Ultra-low yields and negative real interest rates will remain as they are now for much longer, this should provide support for the gold prices in the longer term.”
Lower interest rates decrease the opportunity cost of holding non-yielding bullion. Gold has gained around 26% in 2020 and it is widely viewed as a hedge against inflation and currency debasement.
In other markets, silver remained flat at $24.73 per ounce while platinum gained around 1.2% to reach around $891.75. Palladium gained 0.9% to trade at $2,293.71.