At the end of the week, gold jumped as the dollar weakened after the European Central Bank kept its policy unchanged and US unemployment demands remained high, clouding hopes of a speedy economic recovery from the effects of the coronavirus pandemic.
The market ended the week with a weak note, although it closed higher for the period after the US Congress failed to reach an agreement on the coronavirus aid package.
Last week, Comex gold in December settled at $ 1947.90, which is $ 13.60 or + 0.70%. That was higher than the two-week low of $ 1911.70.
In essence, the main influences on price action were the decisions of the ECB and the US Congress. On Thursday, ECB President Christine Lagarde refrained from signals that the bank would extend the stimulus while the US Senate blocked a republican bill for new aid for coronavirus.
Gold has risen 28 percent this year, backed by a huge stimulus from the world̵
Nevertheless, the ECB’s news was enough to send the euro higher, lowering the US dollar index and helping to keep gold prices down.
Another surprise that may have helped weaken gold prices is the news that the US Senate is blocking a Republican bill that would provide about $ 300 billion in new aid for coronavirus.
It seems that wherever we look, we see reasons for higher prices and reasons for lower prices. This creates covered trade.
The development of COVID-19 vaccines and the improvement of economic data represent a short-term wind to gold, while low and negative interest rates, a weaker US dollar and expectations of further incentives maintain the balance of risks upwards.
Awaiting the announcements of the Federal Reserve after the two-day meeting on September 16, we expect to see a very carefully worded statement. The Fed will have to be patient before raising interest rates as it waits for the economy to recover. But there is bad news. He may not have much ammunition left in his arsenal to boost the economy if he eventually needs more help. We therefore expect Fed President Powell to head to Capitol Hill and ask Congress to do more.
The bottom line: Don’t expect the Fed to say something bullish about gold.
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