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Gold Rises 1% As Warren Buffett Buys Barrick, Dollar Slumps

August 17, 2020 at 13:54 by Andrew Moran

Gold futures are rising more than 1% to start the trading week, driven primarily by billionaire investor Warren Buffett becoming a gold bug and the US dollar slumping. The yellow metal suffered its worst week since March last week after recently soaring to a record high. Can gold prices reclaim $2,000?

December gold futures surged $20.40, or 1.05%, to $1,970.20 per ounce at 13:33 GMT on Monday on the COMEX division of the New York Mercantile Exchange. Gold prices declined more than 3% last week, but they might be poised to top $2,000 in the coming sessions. Year-to-date, the yellow metal is up nearly 30%.

Silver, the sister commodity to gold, is rallying to kick off the trading week. September silver futures advanced $1.241, or 4.76%, to $27.33 per ounce. The white metal also plunged 7% last week, but silver prices are still up 53% so far this year.

Precious metals are climbing on news that legendary billionaire investor Warren Buffett is changing his opinion on gold by acquiring a stake in Barrick Gold Corp. According to a recent Securities and Exchange Commission (SEC) regulatory finding, Berkshire Hathaway purchased 20.9 million shares in the second quarter, with a current market value of $565 million. The stock popped more than 11% to top $30 after the news broke.

This was an important move because Buffett had repeatedly lamented on the utility of gold, stating in a speech at Harvard:

“(Gold) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

The same filing also showed that Berkshire dumped shares in JPMorgan Chase, Wells Fargo, Goldman Sachs, and Occidental Petroleum. This has led some analysts to speculate that he has turned bearish on the US economy in the post-coronavirus recovery.

A weaker dollar is helping fuel gold’s rally on Monday. The US Dollar Index, which measures the greenback against a basket of currencies, tumbled 0.17% to 92.93, from an opening of 93.07. A lower buck is good for commodities priced in dollars because it makes it more expensive for foreign investors to purchase. The index suffered a 0.8% weekly loss last week, bringing its YTD drop to 3.6%.

Investors’ eyes will be on the minutes from the Federal Reserve’s July policy meeting. They will be released on Wednesday, and analysts will determine if there are any hints if the US central bank will modify its guidance ahead of the September Federal Open Market Committee (FOMC) meeting.

In other metal markets, September copper futures tacked on $0.052, or 1.82%, to $2.911 per pound. September platinum futures picked up $15.50, or 1.62%, to $974.60 per ounce. September palladium futures spiked $74.20, or 3.46%, to $2,218.00 an ounce.

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