News

Gold prices rise with the decline of the dollar and are heading to achieve gains for the second week

  • 22 October, 2021
  • 2:34 pm EEST

Gold prices rose in trading on Friday, supported by the weakness of the dollar, with the rise in US bond yields, and the increasing expectations of investors that central banks would begin to reduce economic support.

Gold prices are heading to achieve gains for the second week in a row, after they fell at the end of trading yesterday, Thursday, recording the first decline in 3 consecutive sessions.

 

Gold Prices Today

By 09:45 AM GMT (12:20 PM GMT), the price of gold futures – for December delivery – increased by 0.64%, to record $1,793.30 an ounce.

The spot price for the yellow metal also rose by 0.54%, recording $1,792.50 an ounce.

Bullion prices were on their way to a second week of gains, supported by a weaker US currency, as the dollar’s decline in gold makes gold more attractive to buyers holding other currencies.

Bullion prices have traded in a wide range between $1,749 and $1,800 so far this month, with a sharp rise in 10-year US Treasury yields capping the upside.

 

Momentum On Gold

“While gold continues to track a series of lower-high levels and appears poised for another test at $1800, it could struggle to maintain momentum above $1800,” said Jeffrey Halley, chief market analyst for Asia Pacific at Oanda.

He added: “When gold is making strong gains these days, a lot of the flow seems to be dominated by the search for quick money momentum, unfortunately for gold, that money is heading towards the exit door at the first sign of trouble.”

The sharp rise in benchmark 10-year US Treasury yields so far this month has capped gold’s rally by increasing the opportunity cost of the non-interest-bearing precious metal.

 

Interest Rates

Atlanta Federal Reserve Chairman Rafael Bostic said he expects high inflation to continue into 2022, predicting that the central bank will raise interest rates by the end of next year.

While Federal Reserve Governor Christopher Waller said, on Thursday, that the US Federal Reserve should allow a reduction in its balance sheet of $ 8 trillion over the next two years.

The Bank of Japan is also discussing the phase-out of the Covid-19 loan program if infections in the country continue to dwindle, potentially preparing the bank to exit its major crisis mode policy sooner than investors expect, sources told Reuters.

Gold is often seen as a hedge against inflation, although lower stimulus and higher interest rates push up government bond yields, reducing the attractiveness of bullion.

 

Price Forecast

In a note, UBS analysts said rising inflation expectations and declining growth expectations could support gold prices in the next month or two, although that does not signal a “system change” toward stagflation.

Experts expect gold prices to be at $1,700 per ounce at the end of March 2022 and $1,600 per ounce by the end of December 2022.

“The global economy will be very stable, given the strong household consumption and strong corporate earnings, and in such circumstances, gold is not doing well in the long run,” said Hitch Jan, senior analyst at Mumbai-based YES.

 

Metal Price

At the same time, the price of silver futures contracts for December delivery increased by 0.93%, to reach $24.40 an ounce.

The spot platinum price also rose by 0.93%, to record $1,062.63 an ounce, and the spot palladium price declined by 1.04%, to record $2,038.66 an ounce.

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