Gold continues to get support from weak dollar; buy cautiously: Ravindra Rao

Gold price chart

Although the soaring gold price could be an indicator of economic uncertainty, financial markets in Indonesia and overseas have generally been performing well since the slump in March, according to Mirae Asset Sekuritas Indonesia economist Anthony Kevin.

"Investors may have become anxious that the appreciation in stock prices will not be justified in second quarter earnings, prompting them to buy gold as a hedge against market volatility", Anthony said.

The strategists raised their 12-month price target for gold to $2,300 an ounce, or 19 percent above the record $1,931 where July futures settled on Monday. The sharp rise in silver price has, however, pushed investors to sidelines.

Orion Advisor Solutions CIO Rusty Vanneman discusses his top ETF sector picks if the us dollar continues to weaken. "The move to $2,000 an ounce will happen much more quickly than the move from $1,800-$1,920", he said.

Worries over the impact of rising coronavirus cases on global economy and expectations of possible inflation from more stimulus measures supported gold. Geopolitical tension between US & China and weakness in dollar supports the bullions.

All of the largesse has pushed the US dollar index down by 2.7 percent this year; it's trading near its lowest level since June 2018. Expectations are they'll keep interest rates near zero, while markets will also be watching for any signals around shifts in strategy.


"The message from the Fed meeting is expected to be dovish, reiterating the need for more fiscal measures, which is likely to be supportive of gold", said Nicholas Frappell, global general manager at Sydney-based ABC Bullion.

"In our view the primary drivers of the gold price are its negative correlation to real interest rates and the dollar". Last week, gold prices recorded one of the best weeks in the last few years by gaining over 5%.

For silver, there's an added boost from concerns about supply, with the Silver Institute earlier this month forecasting a 7% decline in mine production in 2020.

Silver tends to perform very strongly when the desire for wealth protection, or fears of inflation-induced wealth destruction, are high and when global economic activity is improving, according to Citigroup. Along with Gold, the week's trading session started on a strong foot for silver as well, touching the 8 years high of Rs 64,849.

Until then, it remains to be seen if the crowding behavior in the US Dollar will also carry into August as the IG Client Sentiment reportcontinues to show retail traders net-long USD/CHF, USD/CAD and USDJPY, while the crowd remains net-short NZD/USD, AUD/USD, GBP/USD and EUR/USD.

Related:

Comments

Latest news

More Than 1,000 New COVID Cases Reported in Nevada Tuesday
The Chippewa County Department of Public Health has released an update on where Chippewa County stands in terms of COVID-19 cases. So far, hospitalizations have increased only slightly from a low this month of 231 on July 10 to 257 on Monday.

South Korea to have solid-fuel rockets in major deal with US
A missile fired from South Korea with a maximum range of 800 kilometers is still enough to strike all of North Korea. Solid fuel offers greater mobility for missiles and rockets, and reduces launch preparation time.

Verlander out of action for two weeks with forearm strain
The 2019 AL Cy Young Award victor said the report was "not accurate" and hoped to return soon after resting. The 37-year-old Verlander earned a victory over the Seattle Mariners in a 73-pitch performance on Friday.

Pfizer and BioNTech begin mass human trials on potential COVID-19 vaccine
The World Health Organization (WHO) is tracking more than 140 candidate vaccines of which only 5 are in Phase 3 clinical trials. Half of the participants will be given two shots of the vaccine, while the other half will receive two shots of a placebo.

Donald Trump Jr's Twitter account restricted over COVID-19 misinformation
The video was taken down by the social media company for breaking its rules on COVID-19 misinformation. Trump Jr's spokesperson had tweeted earlier that Twitter had suspended the president son's account .

Other news