Will Gold Follow the LBMA Conference Projections?
(Continued from Prior Part)
US Dollar Index falls
Gold rebounded on Tuesday, October 20, supported by weakness in the US dollar and equities. Gold futures on COMEX on Tuesday gained 0.40% and touched a high of $1181, closing at $1177.50 per ounce. Gold emerged as a winner on Tuesday after snapping its previous two-day losses.
The US dollar proved weak against a basket of major currencies such as the euro, the British pound, the Swedish krona, the Swiss franc, the Japanese yen, and the Canadian dollar. The US Dollar Index fell 0.12% on October 20 and saw a trailing-30-day loss of 1.1%.
When the dollar is weaker, gold becomes more affordable for investors who hold other currencies. This relationship between gold and the US dollar is depicted in the chart above.
Equities drop
Among the 24 commodities listed on the S&P Goldman Sachs Commodity Index, gold is ranked fourth on a year-to-date basis. Though gold has seen seven down-days in the past ten trading days, it has maintained an approximate 4% rise on a 30-day trailing basis. Gold is now trading close to its 200-day moving average price.
Weakness in equity markets also triggered some safe-haven buying of precious metals. Wall Street closed lower on Tuesday, October 20, 2015. Asian equities, too, gave a sluggish start on Wednesday, October 21.
The euro rose against the US dollar on Tuesday, October 20, on strong economic data. Monetary easing comments from the European Central Bank spurred the currency. Bullion market investors are keeping a close watch on the data from the United States for further price changes.
Mining companies such as IAMGOLD (IAG), Gold Fields (GFI), Goldcorp (GG), and Centerra Gold (CG.TO) have their eyes glued on the Fed’s rate-change decision, as it may substantially affect their profitability. These four companies together contribute 13.7% to the Market Vectors Gold Miners ETF (GDX).
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