Gold prices have fallen through critical resistance and are trading near their lowest level in a month as the US Dollar and Euro face each other in currency markets. However, Commerzbank commodities analysts said investors should look past the noise in the short term and focus on the long term trend.
« Gold should emerge victorious in this environment as it cannot be replicated at the push of a button like the USD, EUR or other fiat currencies can, ”analysts said in a published report. Monday.
“After all, given the negative impact of the corona pandemic on the economy and inflation, hardly any central bank wants to see a currency that is too strong right now,” they added.
The comments come as gold prices are testing critical support at $ 1,900 an ounce. December gold futures last traded at $ 1,904.50 an ounce, down nearly 3% on the day.
German bank analysts said Wednesday’s Federal Reserve monetary policy meeting was extremely bullish on gold, with the central bank saying it did not expect to raise interest rates until in 2023. They added that the Federal Reserve’s forecast should be negative for the US dollar.
However, there are currently other factors driving the currency markets.
Some analysts say the US dollar is seeing some momentum on Monday after European Central Bank President Christine Lagarde said Europe’s economic recovery remained uncertain, incomplete and dependent on bringing the virus outbreak under control.
Commerzbank analysts have said they expect the ECB to continue talking about the euro’s decline as they are unlikely to tolerate any further appreciation of the euro.
“So a currency war has started between the USD and the euro that other currencies may well join in,” analysts said.
Commerzbank said Federal Reserve Chairman Jerome Powell would in turn speak about the falling US dollar as he testified before Congress this week.
“He is likely to urge members of Congress to approve a new budget package now that the Fed has done what it can to stimulate the economy with its new stance in monetary policy. Monetary and fiscal policy therefore remains extremely expansionary, paving the way for further gold price gains, ”Commerzbank analysts said.
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