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Gold & Other Metals Tumble Under Pressure from Strong Dollar

September 23, 2020 at 20:30 by Vladimir Vyun

Gold futures sank today, and other precious metals, as well as copper, logged big losses on Wednesday too. The strong US dollar was the main perpetrator in the slump of the metal market. The US Dollar Index is currently up 0.41% to 94.3750.

Gold and the greenback have somewhat confusing relations. On one hand, being both considered a safe haven, they can move in one direction. On the other, the dollar usually moves inversely to commodities priced in the US currency, and that includes the yellow metal. Currently, though, the dollar clearly outperforms bullion in the role of a safe asset. Market analysts speculated that it is because the US economy looks robust compared with European economies. Indeed, today macroeconomic data showed that the services sector in the eurozone slipped back into decline, while the US services sector continued to expand, albeit at a slightly slower pace.

Experts are divided in their outlook for gold. Some argue that fundamentals will continue to drive investors to the safety of the dollar, and that will provide a strong hurdle to the metal. Others speculate that traders prefer to diversify their portfolio and will likely jump at the chance of acquiring bullion at lower prices. Meanwhile, market participants will watch how central banks respond to the challenges that the COVID-19 pandemic poses to the economy. If banks will continue to ease their monetary policy, gold can profit from that. The problem is that many central banks are close to exhausting their arsenal of stimulating measures and may just not have room for loosening monetary policy further.

Futures for delivery of bullion in December tumbled by $42.2 (2.21%) to $1,865.4 per troy ounce as of 20:26 GMT on COMEX today. Silver plunged as much as $1.62 (6.62%) to $22.9 per ounce. Spot price for platinum dropped by $29.28 (3.36%) to $841.13 per ounce, while palladium has managed to erase its small losses, trading about flat at $2,228.74 per ounce. Contract for copper subtracted $0.101 (3.3%) from its value to trade at $2.96 per pound.

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