Gold prices surged breaking the records two weeks ago as it recorded over $2,000 per ounce for the first time. The precious mineral which saw a sharp surge in its pricing has however dropped as the current price stands at $ 1938.09 today, Wednesday 12th August 2020 as a resurgent dollar has forced bullion investors to reassess their positions after a record-breaking price rally.
Spot gold fell as much as 2.5% to a near three-week low of $1,863.67, resuming its free-fall after a brief break in early trade. It was down 1.6% to $1,881.55 extending losses after a 6% plunge on Tuesday and U.S. gold futures slid 2.8% to $1,892.
Silver prices have also tumbled 3.3% to $23.96 per ounce after falling 15% in the previous session. Platinum eased 0.3% to $927.60, while palladium rose 1.1% to $2,113.49.
As the dollar becomes resilient and equities surge, gold has suffered its biggest one-day drop in more than seven years. However, there is growing uncertainty about a U.S. stimulus deal which is being weighed on Asian stocks today.
A jump in U.S. Treasury yields helped the dollar extend its winning streak, making gold more expensive for those who were holding other currencies. Higher yields also increased the opportunity cost of holding non-yielding gold.
Bullion’s gains for the year now stands at about 25% as investors buy the metal as a hedge against a coronavirus-driven slowdown and fears of currency debasement as central banks flood the economy with money to ease the blow.
Commenting on the fall in golds price, IG Markets analyst Kyle Rodda said “It looks like some of the euphoria is coming out of the gold market, with a test of support around $1,800 now looking possible.
“A lot hinges on U.S. yields and the factors driving them at the moment. Also, dollar’s strength will be something very important to watch over the next few days and weeks.”
ING analyst, Warren Patterson also said,
“With central bank policies likely to remain loose for the foreseeable future, gold could move back towards $2,000.”
Background
Gold’s price two weeks ago surged by hitting records, with the metal for immediate delivery closing in on $2,000 an ounce as the search for haven assets continued amid the coronavirus pandemic.
Although the impact of the pandemic hit many sectors and minerals, spot bullion surged 11% in July, the biggest monthly gain since 2012, as investors weighed a weaker dollar and recorded low U.S. real yields.
Spot gold rose as much as +0.6% to $1,988.40 an ounce and traded at $1,973.59 while most-active futures traded as high as $2,009.50. Spot silver dropped 0.4% to $24.2921 an ounce after surging 34% in July.
