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Gold in bull market as Dollar weakness drives interest higher

by | 25 Jan, 2018

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Gold prices are in a bull market mostly thanks to a weaker Dollar, which is making the yellow metal more appealing to overseas buyers. As a rule, when the value of the Dollar increases relative to other currencies around the world, the price of gold tends to fall in U.S. dollar terms, because gold becomes more expensive in other currencies. Conversely, as the value of the U.S. dollar moves lower, gold tends to appreciate as it becomes cheaper in other currencies. Demand tends to increase at lower prices.

Gold hit $1,360 an ounce Thursday, touching levels not seen since 2016 after U.S. Treasury Secretary Steve Mnuchin said a weaker greenback was positive for the U.S. in terms of trade and opportunities at the World Economic Forum in Davos.

Not only this, but tough words on Chinese trade practices from Commerce Secretary Wilbur Ross may have also pushed some investors towards the safe haven asset and boosted up the price amid fears of escalating economic tension between America and China.

Speaking at Davos, Ross said: “There have always been trade wars. The difference now is U.S. troops are now coming to the ramparts.”

The Secretary was keen to point out that though other nations have criticised the U.S. for taking an isolationist and anti-free trade stance on global trade, the idea that China wasn’t equally protectionist was a farce. He said: “The Chinese for quite a little while have been superb at free-trade rhetoric and even more superb at highly protectionist behaviour.”

In the broader metals market, silver has been left behind due to concerns about the impact of Trump’s decision to put tariffs on imports of solar panels, spurred by alarm over “artifically low-priced solar cells and modules from China”. The connection here is that silver paste is a key ingredient in solar photovoltaic cells, the power system behind the panels.

Related: What are the biggest risks for investors in 2018? Invstr CEO Kerim Derhalli gives his take

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Gold is in a bull market due to geopolitical tensions and a weaker Dollar

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

 

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