Dollar Continues to Weaken, Gold Soars

  • Investors turned their attention to stimulus negotiations and Friday's employment report.
  • The United States is losing momentum for economic recovery.
  • The rebound in silver prices is coming, mainly due to the rebound in gold prices and the heating up of manufacturing demand.

In the New York market on Thursday, the price of gold fluctuated upwards. Spot gold once rose by more than $26, refreshing its high since September 22 to $1,911.98 per ounce. Spot silver soared 4%, reaching a maximum of $24.168 per ounce. The dollar index fell to a one-week low, enhancing gold’s attractiveness to holders of other currencies.

The William Tecumseh Sherman Monument in New York.

Investors turned their attention to stimulus negotiations and Friday’s employment report. COMEX  gold futures closed up $20.80, or 1.1%, to $1,916.30 per ounce, the highest closing price in two weeks.

Silver futures for December delivery rose 76 cents, or 3.2%, to close at $24.254 per ounce. Naeem Aslam, a chief market analyst at AvaTrade, said that the price of gold is rising because investors are worried about fragile economic data.

US consumer spending increased by 1% in August, but the increase was the lowest since the US economy restarted. The Institute for Supply Management (ISM) September manufacturing index fell to 54.6% from 56% in August.

The above economic data confirms that the United States is losing momentum for economic recovery. Without new stimulus measures, the economic recovery will stall.

Kotak Securities analyst Madhavi Mehta said the U.S. dollar rose sharply last week due to safe-haven buying, but fell this week because the focus shifted to the US economy, Congress and the government increased their efforts to negotiate stimulus packages and the first presidential debate.

Unless the United States makes a decision on a stimulus plan, the US dollar may continue to be under pressure, thereby supporting gold.

Govett precious metals company’s CEO David Govett said that there is no place where you can invest your money to get a good return. Funds from the economic stimulus plan will enter the gold market. The situation will get worse before it gets better, so the price of gold will benefit and rise to $2,000.

However, the U.S. stimulus package still has not made breakthrough progress. Spot gold has rebounded from Monday’s low ($1,848.91 per ounce) by more than $60, and there may be limited room for further growth in short-term gold prices.

As more companies announce layoffs (including airlines that received federal assistance earlier), both sides are facing increasing pressure. The November 3 general election is approaching, and there is little time left for action.

However, the Democratic Party and the White House say there are still big differences in the overall scale of the stimulus package and how the aid is allocated.

U.S. Senate Minority Leader Charles Schumer (D-NY) said on Thursday that he had talked with Speaker of the U.S. House of Representatives, Rep. Nancy Pelosi (D-CA), and said the Trump administration had not reached an agreement on the issue of epidemic assistance.

A silver bar.

Speaker Pelosi, said at a press conference on Thursday morning that the two sides are still far apart in the total amount of the stimulus plan and the way the funds are allocated.

There are many factors leading to the current deadlock, including assistance to state and local governments. These problems still exist.

Spot silver rose more than 4% in intraday trading, rising to $24.168 per ounce. Capital Economics commodity economist Samuel Burman pointed out that higher gold prices and recovery in industrial manufacturing demand will boost silver prices, which will rise by the end of this year.

The silver market fell sharply in September, falling from a peak of $29 to below $23 per ounce. The recent rebound in the US dollar has put the entire precious metals market under substantial pressure.

However, the rebound in silver prices is coming, mainly due to the rebound in gold prices and the heating up of manufacturing demand. Overall, the rise in the price of gold will be able to boost the price of silver to $25 and $27 per ounce by the end of this year and next year.

Burman pointed out that the 10-year nominal interest rate in the United States is expected to fall to 0.5% by the end of this year and remain at that level next year. The decline in interest rates is good news for gold and silver.

The Fed has stated that it will continue its extremely loose monetary policy until 2023, which means that inflation will exceed the target. It is expected that at the end of this year, the price of gold will return to the $2,000/oz mark. At the beginning of next year, silver demand will return to its pre-epidemic level.

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Benedict Kasigara

I have been working as a freelance editor/writer since 2006. My specialist subject is film and television having worked for over 10 years from 2005 during which time I was the editor of the BFI Film and Television.

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