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Gold Recovers From Crash on Dollar Weakness, Economic Uncertainty

October 14, 2020 at 15:30 by Andrew Moran

Gold futures are recovering from their substantial loss on Tuesday, buoyed by weakness in the US dollar and widespread economic uncertainty. Investors believe that the fundamentals of the yellow metal remain intact, such as historically low interest rates, exploding national debt, and electoral uncertainty. After topping $2,000 this past summer, gold prices have been seesawing at the $1,900 level.

December gold futures surged $19.70, or 1.04%, to $1,914.30 per ounce at 15:17 GMT on Wednesday on the COMEX division of the New York Mercantile Exchange. Despite gold’s steep drop on Tuesday, prices are still up nearly 2% over the last week. Year-to-date, gold has advanced by nearly 26%.

Silver, the sister commodity to gold, is also rallying midweek. December silver futures jumped $0.421, or 1.74%, to $24.55 per ounce. The white metal endured the same drop on Tuesday before paring its losses. So far this year, silver prices are up more than 37%.

One of the chief factors for the boost in precious metals is a sliding greenback. The US Dollar Index, which measures the greenback against a basket of currencies, fell 0.29% to 93.26, from an opening of 93.54. A lower buck is good for commodities priced in dollars because it makes it cheaper for foreign investors to purchase. Year-to-date, the index is down 3.25%.

Analysts are also alluding to uncertainty surrounding the 2020 presidential election between President Donald Trump and former Vice President Joe Biden. As both camps potentially question the outcome of the electoral contest, and the paucity of clarity around both candidates’ plans for the next four years, gold bugs think this could boost prices. Still, investors are betting on a Biden victory next month.

Meanwhile, financial markets have been expressing some doubts that the White House and the Democrats could come to an agreement regarding a new coronavirus-related stimulus and relief package before the year’s end. This has contributed to a pause in the broader equities arena.

That said, Wall Street is bullish on gold due to the variety of factors, from accommodative monetary policy to fiscal stimulus, that would affect the dollar and trigger bouts of inflation.

Ultimately, according to market observers, gold prices need to test $1,920 or $1,930 to have a chance at challenging the crucial psychological threshold of $2,000.

In other metal markets, November copper futures edged up $0.0055, or 0.18%, to $3.05 per pound. November platinum futures slipped $5.50, or 0.63%, to $867.80 an ounce. November palladium futures tacked on $15.10, or 0.64%, to $2,359.39 per ounce.

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