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Denis Sergienko • 2022-10-20

Gold has Benefited from the USD Weakness

Gold has Benefited from the USD Weakness

Gold prices continue to recover this Tuesday. They have climbed up to reach $1,780 per ounce. It seems like the precious metal is taking advantage of the weakening USD.

Gold Price Is Balancing

Several conflicting forces make the gold price balance between them. Those forces involve risk aversion sentiments on the one side and high real yields and the USD on the other side which also push market sentiments down.

However, the risk aversion sentiment experienced a renewal earlier this day. As a result, we can see the high-risk asset and stock markets moving down. In simpler words, both markets are selling off, which gives gold a new boost of energy to recover. Once again, the yellow metal proves it is yet among the safest-haven assets that still attract investors.

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As for the dollar, it has truly been one of the strongest instruments over the last few months. However, it has been gradually losing strength starting since the beginning of this week.

The USD Is Weakening

The dollar has recently entered the overbought territory. It resulted in a gradual slippage that took off last week. The currency continues to decline featuring the USD index dropping to the 101.7 level. Meanwhile, bond yields keep showing stability with the treasury note yielding close to 2.7%.

Now, we can see gold competition directly with yields. In this battle, gold looks like a more compelling instrument to invest in, especially when taking into account the US bond yield and USD decline.

The gold price has the potential to further growth. Increasing inflation rates can be another driver for the gold price increase. Taking into account the soaring fear of recession, the metal may turn out to be among the safest assets to buy and hold.