Gold price have been rallying in the last three trading days. Today, (4/12/2020), the price of the gold precious metal has experienced a correction but is still above the level of $1,800 / troy ounce.
World gold prices in the spot market arena fell 0.1% from yesterday’s closing position. The price of gold was pegged at US $ 1,838.5 / troy ounce. So far this week the price of gold has strengthened by 2.9%.
The price of gold seemed to rise from the grave when the US dollar was under severe pressure. The dollar index is currently at its lowest level in 2.5 years. On a week to date basis the dollar index has fallen 1.16%.
Gold and the US dollar have a negative correlation
Gold and the US dollar have a strong negative correlation. This means that gold price movements are against the US dollar. When the US dollar is under pressure, gold benefits and has the momentum to strengthen.
Gold prices slid in November when there were four Covid-19 vaccine developers who claimed the results of the final stage clinical trial of the vaccine candidate they developed had a protection effectiveness level of up to 90% or even more.
The news this week has not made gold prices rocking like before. In the end, vaccines have become a game changer.
However, to carry out a mass Covid-19 vaccination, of course, requires cost, process and time. A forward-looking market welcomes the news of vaccines and is more willing to take risks and be more aggressive.
Gold as a safe haven (minimal risk) asset that is not productive is discarded. Investors turn to stocks, commodities and even cryptocurrencies like bitcoin in search of thicker cuans. That is the explanation behind the significant correction in gold prices last month.
Gold Prospects for Next Year
Many analysts still view gold positively because the bullion’s narrative and fundamentals have not changed. In the 2021 outlook, analysts at British research firm Metals Focus said they expect gold prices to be boosted to US $ 2,300 / troy ounce next year.
“The precious metal has been under significant pressure recently as investors revisit cyclical stocks after the vaccine news started to come in,” said Neil Meader, director of gold and silver at Metals Focus in the report.
“But we doubt whether this will be maintained. It will take time for the vaccine to become widely used. We also don’t expect it to return to normal until at least mid-2021.”
Analysts at Metals Focus said that the gold market will continue to benefit from further stimulus measures, low bond yields and increased inflationary pressure.
“Low yields benefit gold from the minimal opportunity cost of holding the metal. It also limits the bond market’s ability to act as a hedge against a correction in equity prices,” analysts said.
At the same time, companies also see the potential for gold’s safe-haven appeal to attract investors.
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