COMMENTARY – Gold dips on firmer greenback, sentiment mixed over outlook

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Gold eased on a stronger U.S. dollar on February 12, with sentiment over the near term outlook for bullion prices mixed.

Gold was down 0.2 percent to $1,824.56 per ounce, pressured by the firming dollar, which made dollar-denominated gold more expensive in other currencies.

“The gold market is experiencing a slight crisis of confidence with mixed sentiment in the marketplace as the precious metal competes with other assets as a safe-haven,” wrote Kitco Editor Neils Christensen.

Some analysts believe that gold prices will rise due to prospects for a $1.9 trillion U.S. stimulus package, and possibly a softening dollar, which could stoke inflationary expectations. Gold is seen as a hedge against rising prices.

Any delays or roadblocks to the stimulus package could weigh on the gold price.

Other analysts feel that a successful vaccinations rollout could encourage hopes for a global economic recovery and drive up interest in equities, rather than precious metals considered to be “safe havens”.

Furthermore, rising interest in investing in bitcoin as an alternative safe haven to gold or the dollar, may drag on gold prices going forward.

The longer term outlook for gold prices remains constructive as U.S. interest rates are likely to remain at very low levels for a prolonged period due to the need to stimulate the economy during the pandemic.

A climate of rock bottom interest rates is a bullish signal for non-interest-bearing gold as it makes yield-bearing assets relatively less attractive to investors.

Disclaimer: Any opinions expressed in this column are solely those of the author and should not be considered as investment advice.

Gold Commentary

Credit: Kimjoux