The stronger US dollar lowered the price of gold


At the beginning of the new trading week, which is the 45th one of 2019, the value of the US dollar vis-à-vis other world currencies increased and investment gold ceased to be attractive to investors on the global commodity market. As a result, on Tuesday, 5 November, 2019, the price of gold slipped below US$ 1,500 per troy ounce. According to analysts, the drop in the price of gold has partially raised the interest of investors speculating on the value of gold soon to be increased again.

On 6 November, 2019, at 6:59 am CET, the price of gold on the COMEX (Commodity Exchange) commodity market was US$ 1,485.60 per troy ounce with a daily gain of + 0,13%. The change in the trade trend from the bear to the bull market occured when the US Dollar Currency Index (DXY) was seen at the 97.89 price level with a daily depreciation of -0.09% according to this index. Financial strategists and economic analysts state that current re-strengthening of the gold price is a standard phenomenon of the inverse relationship of gold price and the exchange rate of USD.

Apart from this, the gold price being inverse to the USD exchange rate, Asian traders and investors in particular expect further clarification of US-China trade relations. The previous drop in gold prices on the global commodity market was, according to reports by economic correspondents and analysts, mainly due to excessive optimism in relation to the trade relations between the US and China as the two strongest economies in the world. The current situation brings further uncertainties in the US-China trade relationship, that still need to be clarified. Based on these facts, the US dollar strengthened and its higher exchange value made gold more expensive for investors from outside the dollar zone, especially for Asian traders from China, whose interest thus fell.

On Wednesday, 30 October, 2019, the central bank of the United States – the Federal Reserve System (FED) at its regular Federal Open Market Committee (FOMC) meeting, lowered interest rates – for the third time this year – to a range of 1.5% – 1.75% of the annual interest rate, which, according to analysts, allowed for a gradual weakening of the USD exchange rate. This fact should contribute in the short-term investment horizon – till the end of 2019 – to a rise in the price of gold on the global commodity market. Apart from this, the issue of the United Kingdom’s departure from the EU, known as Brexit, continues to grab investors’ attention. In early December, before the extraordinary parliamentary elections in the UK set for 12 December, 2019, analysts expect increased gold price volatility regarding these events.

photo source: unsplash, Katie Harp