At the end of trading Monday (8/2/2020) gold prices soared. This increase also occurred for two consecutive days. There are several factors that support the increase in gold prices. Namely, expectations of a large US economic stimulus package supporting the attractiveness of gold as an inflation hedge. Apart from that, there was also sentiment from Tesla.
The most active gold price contract for April delivery on the COMEX division of the New York Exchange rose 21.2 US dollars, or 1.17 percent, to 1,834.20 US dollars per ounce.
On Friday (5/2/2021), gold futures jumped 21.8 US dollars or 1.22 percent to 1,813.00 US dollars.
Factor that Influences Gold Prices
US President Joe Biden send the Democrats in Congress paved the way for a $ 1.9 trillion Covid-19 aid package. As lawmakers agree on a budget outline that would allow them to strengthen the plan without Republican support. .
The US Congress has signaled that it will pass an economic stimulus bill in the coming days to mitigate the effects of the Covid-19 pandemic on the economy. This
adds to the extensive support for gold because Congress pumps a lot of money into the economy, and inflationary pressures will eventually affect the money supply.
US Treasury Secretary Janet Yellen said on Sunday that the country will return to full work next year if Congress approves a stimulus package.
“Yellen is talking about full employment by 2022 with two trillion US dollars in stimulus pushing for a possible spike in inflation, which is good for gold,” said BMO’s Head of Base and Precious Metal Derivatives Trading, Tai Wong.
Gold Gets Sentiment from Elon Musk
Major US stock indexes rose to record highs on a push for economic recovery bets.
“Inflation trade (an investment strategy that seeks to profit from rising price levels that are influenced by inflation or inflation expectations). So it can replace any negative impact the dollar has on gold and silver,” said Jim Wyckoff, a senior analyst at Kitco Metals.
Gold also received support from the jump in bitcoin prices. Especially after Tesla Inc said it had invested about 1.5 billion US dollars in cryptocurrencies.
In its 2020 annual report, Tesla also said it may invest in certain alternative reserve assets. Including digital assets, gold bullion, gold exchange-traded funds, and other specific assets.
“Interest in asset classes that are stores of value such as gold and silver, after the Tesla purchase of bitcoin, is helping prices,” said David Meger, Director of Metals Trading at High Ridge Futures.
But according to Wong, bitcoin and gold are basically uncorrelated. “The current surge in bitcoin may add to sentiment, but not the main driver,” said Wong.
Meanwhile, the price of other precious metals. Silver for March delivery rose 55.7 cents, or 2.06 percent, to close at 27.576 dollars per ounce. Platinum for April delivery jumped 42.2 US dollars, or 3.72 percent, to 1,175.2 US dollars per ounce.
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