Gold prices are firming, trading in a range around $3,380 per troy ounce. This steadiness coincides with the noble metal continuing its weekly recovery, hovering in the lower-$3,400s. Geopolitical uncertainty is just one of the market factors that have influenced gold’s upward trajectory. A persistent selling bias of the US Dollar along with falling US yields are major components.
Over this last week gold has shown a significant positive reversal strongly supported by the US Dollar decline. Gold investors are winning in this trend. This can create a vicious cycle as a weaker dollar makes gold an even more attractive alternative investment. In recent trading sessions, gold is still well under the $3,400 level. This positioning continues to leave it vulnerable to its recent highs.
Bond market dynamics have been a key factor propping up gold’s price. Declining yields across the US yield curve have reduced the opportunity cost of holding non-yielding assets like gold. Investors are flocking to gold as a safe haven as inflation spurs jitters from mixed economic data during the ongoing public health crisis.
Beyond currency and yield moves, rising geopolitical tensions around the world are escalating demand for gold. When uncertainties rise, as we are experiencing currently, investors turn to the stability of gold to increase demand and provide a safe haven. This trend is especially pronounced during periods of political discord or economic uncertainty.
According to market analysts, these three factors will shape gold prices in the short-term. A weak dollar, low yields, and rising geopolitical risks are the perfect recipe for gold. This is a good thing both for its health and long-term expansion!
“The current market environment supports gold’s position as a safe haven asset,” – an analyst from a leading financial institution.