Gold on cusp of $1,800, but doubts remain
By Daniel Tyson
15:26, 21 October 2021
Bitcoin / USD
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Gold prices are on the cusp of the psychologically important $1,800 an ounce. While world events would seem to be buoying the commodity, its value continued to slip Thursday morning.
Late Thursday morning, gold futures slipped to $1,780.80, down 4.1%.
Several factors would seem to be aiding the precious metal to reach $1,800 an ounce, including a faltering US dollar and comments by various Fed representatives rejecting the idea of any rate hikes in the near future. Bitcoin posting a record high on Wednesday also does not appear to be helping gold.
The decline could be the result of an announcement from Bundesbank President Jens Weidmann that he will resign from the German bank at the end of the year.
Weidmann is regarded as one of the hawks in the Governing Council of the European Central Bank and has frequently spoken out in favour of more restrictive monetary policy, even if he was often unable actually to push this through. His replacement will most likely be a moderate, The Wall Street Journal reported.
“Our economists therefore believe more than ever that the ECB will not be exiting from its highly expansionary monetary policy for the foreseeable future even though the inflation risks have increased significantly of late,” a Commerzbank note reads.
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Also, prices are reacting to Thursday’s slight dip in US Treasury yield as a sign of a weakening US dollar.
Lower yields tend to decrease the opportunity cost of holding non-yielding bullion and a dropping US dollar often increases foreign wants for gold.
Gold being on the cusp of $1,800 is not uncommon. Several days in July gold was trading in the $1,780-$1,795 range. There were days in July and August when gold did break the psychological point by going up as high as $1,814.78 in July and $1,804.90 in August, both times on expectations that the US Federal Reserve might delay cutting back on stimulus payments.
Read more: Commodity market outlook: will slowing economic growth impact prices?
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