Jakarta, CNBC Indonesia – The weakening of the US dollar is a blessing for the precious metal gold. Today, Tuesday (15/9/2020) the price of the yellow metal has strengthened.
At 09.00 WIB, world gold prices on the spot market rose 0.2% to US $ 1,961.4 / troy ounce. At the same time, the dollar index, which measures the strength of the US dollar, weakened slightly. As a commodity priced in US dollars, gold received support from weakness the greenback.
A weaker dollar makes gold cheaper for holders of other currencies, thereby increasing buying interest bullion.
“Gold is up as the dollar is under pressure. We are also seeing Steven Mnuchin suggest that they want some kind of fiscal stimulus deal done, so that it will further weaken the dollar,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
This week, several global central banks will announce their monetary policies, including the Fed as the most influential monetary authority in the world. The Fed will announce its policy on Wednesday, while the Bank of England (BoE) and Bank of Japan (BoJ) the day after.
The central bank’s ultra-accommodative policy to hold the economy from falling further due to the Covid-19 pandemic this year has seen gold prices skyrocket by up to 29%.
Stance dovish the central bank is still visible. The Fed will allow inflation to be higher as long as the average inflation range is at 2%. In order to achieve low interest rates, it will still be held for much longer.
Low interest rates and inflation will trigger the devaluation of the US dollar. Gold as an asset to hedge against currency devaluation and inflation has become an attractive asset for investors.
“The Fed is expected to maintain its inflation target rate, at the 2% target for some time and they will increase Quantitative Easing (QE), so it will remain supportive of gold,” Streible said, quoting Reuters.
CNBC INDONESIA RESEARCH TEAM
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