Gold Prices
Gold price is up by 0.26%, continuing the rally that started four-day ago. The price is trading at $1,768, which is the highest it has been in more than 7 years. Other metals too have rallied, with platinum, palladium, and nickel rising by more than 0.20%.
Gold prices have been in an upward trend, albeit slow, since 2016, when the price settled slightly above the $1,000 level. There are several reasons why the metal’s price has been rising this year. First, the overall stock market has been in an upward trend, which has caused most asset classes to rise. For example, crude oil price is trading at the highest point in months. Similarly, the Nasdaq index is now at an all time high.
Second, the policies of the Federal Reserve has led to a surge in asset prices. Most importantly, the Fed had been printing money at the fastest pace ever. This has seen its balance sheet surge to the highest level ever. The latest figure shows that the balance sheet has jumped to more than $7 trillion. By printing all this money, the Fed has made more people rush to assets like gold and stocks.
Third, the dollar has been weakening. As you know, gold and the dollar tends to have a negative correlation. The USD has fallen because the global economy seems headed for a V-shaped recovery. Look at the PMI numbers that were released yesterday. As the world economy recovers, most investors move back to currencies like the euro and pound. As such, the demand for the currency weakens.
Fourth, price is rising because of the rising risks presented on the economy. The most urgent risk is that the number of new coronavirus cases is rising in the United States. Finally, gold prices are rising because of the recent upgrades by banks like Goldman Sachs, Citi, and Morgan Stanley. All these banks see the price surging to above $2,000.
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On the monthly chart below, the gold price is above the 50-day and 100-day exponential moving averages. The price is also in an overall long-term bullish trend. This trend will remain so long as it remains above the important support of $1600, which is an important psychological level. It is also above the two moving averages. A move below this support will mean that there are more bears in the scene, who will be focusing on bringing the price lower to about $1500.