Gold and the Dollar Index

In recent times, the price of gold has been staying pretty stable. Gold futures price settled at $1,939 for each ounce recently. It didn’t change much throughout last week. The spot price of gold, which many traders pay close attention to, settled at around $1,916.60 for each ounce. 

If the value of the Dollar Index keeps going down below 103, the price of gold might go up. It could aim for higher levels like $1,945 and maybe even reach $1,954 or $1,958. But there’s a catch – a strong dollar and rising yields could make gold’s price increase not as much. It could be limited to a range between $1,929 and $1,959. On the other hand, if the Dollar Index rises above 104.62, it could be bad news for gold. The price of gold might fall and start from around $1,888. And if the Dollar Index goes even higher, say to 104.90 or 105.60, then gold could drop further, maybe even reaching $1,850.



Gold’s Challenges Amid Economic Worries

The Chinese economy is facing problems. Big property developers are struggling, bank loans are at their lowest point in 14 years, exports have fallen the most in over 3 years, and the currency (yuan) of China is losing value compared to the dollar. The central bank of China promised to fix things, but the things they tried, like lowering interest rates and giving financial support, haven’t worked well. Investors want them to do more targeted things to fix the issues.


Around the world, factories are not doing very well in August. Japan’s factories have been doing worse for three months in a row. In the eurozone, there’s a bigger drop in factory activity than people expected. It looks like the UK might also report that its economy is not growing very well this quarter. In the US, business activity has slowed down a lot and almost stopped growing in August. This slow growth hasn’t been seen since February.



What we think

Gold, which is a precious metal often used for investing, is facing challenges. Traditionally the Gold prices moved up in times of uncertainty, inflationary pressure or distress. However the scene may not play out that way. Governments are quick to inject liquidity in such times. Therefore, given the current economic situation and gold staying much below $1,950 an ounce, it’s not certain if it will go up to $2,000 again in a hurry. 


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