Gold has largely witnessed directionless trend since testing the 2012 highs last month. While global growth worries, loose monetary policy stance of central banks, and steady ETF inflows have kept prices underpinned, general strength in the US dollar and lifting of virus-related restrictions has limited upside. Price is now struggling to hold above $1,700 per troy ounce level.
In the last two weeks, gold has closed thrice below $1,700 an ounce level and all the rebounds have failed to sustain so far.
Gold and US dollar have both been seen as safe-haven assets this year. With easing virus restrictions across the globe, gold seems to have lost its safe-haven appeal but US dollar has continued to rule firm.
The strength in US dollar is not justifiable given the weaker US economic data; Fed’s do it all approach and rising virus cases. US ADP jobs report released Wednesday noted a sharp 20.2 million decline in private-sector jobs in the month of April. US Fed has already cut interest rate to record low levels and has maintained that it is willing to take all possible measures. As per John Hopkins update, virus cases in US have risen to 1.22 million while death toll has jumped to 73,400. US share in total cases and deaths stand at a staggering near 32 percent and 27 percent respectively.
The likely reasoning for the strength in the US dollar is worsening outlook for European and other economies. A spare of disappointing economic data and downbeat growth forecast and uncertainty about European Central Bank’s bond purchases have fueled concerns about health of the economy and pulled euro to near two week low.
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