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As we reported , gold prices fell to their lowest level in more than a week on Friday, after the sharp drop in oil prices and the US dollar rising to a nearly 16-month high.
Jim Wyckoff: DXY “a daily negative” for precious metals
Regarding the developments in the market, senior market analyst Jim Wyckoff made the following assessment in a statement:
Sharp drops in crude oil have frightened the unprocessed commodities sector today, including precious metals and gold. Crude oil is the leader of the crude commodities sector and now appears to have peaked, at least in the near term.
A higher US dollar index (DXY) is also a “day negative” for precious metals, says Jim Wyckoff. ICE US Dollar DXY traded at the highest level since July 2020, up 0.5% as Austria declared a national lockdown that could be extended for up to 20 days to help reduce the spread of COVID-19. The largest economy does not exclude similar measures to curb the spread of the deadly pathogen.
A rising dollar can lower demand for currency-priced assets, making them more expensive for buyers using weaker currencies. On top of that, the dollar tends to attract attention in times of uncertainty regarding the global economy by putting pressure on bullion and other commodities.
According to FactSet data, December gold futures prices fell 0.78% to $1,851.60.
“Gold prices will continue to face multiple headwinds”
Increasing COVID cases and curfew reports in Europe are reducing the appetite for risk on Wall Street. This gave support to the US dollar and boosted gold prices in early trading as both are viewed as safe-haven assets. Lukman Otunuga, head of market analysis at FXTM, comments:
Gold appears to be waiting for a new directional catalyst as markets await more clues on how the Federal Reserve will manage rising inflation. Longer term, gold prices will continue to face multiple headwinds in the form of dollar strength and the Fed’s tapering schedule.
Fixed assets like gold are “in tears” according to Adam Koos
Meanwhile, silver for December delivery fell 0.5% to $24,781. During the week, gold fell 0.9% on the most active contract basis, while silver fell 2.2% week on week. Adam Koos, President of Libertas Wealth Management Group, made the following statement on gold and silver prices:
Gold and silver were relatively stagnant this week as all eyes were focused on shorter-term hints of rate hikes, which I don’t believe we’ll see in 2022. There is less news on interest rates from Washington, but more evidence from the economy and the headlines that provides confirmation that inflation and the commodity wildfire are spreading and that there is little Fed power to stop expansion.
Saying that inflation is the economic wind of the commodity forest fire, Adam Koos comments that fixed assets such as gold are in tears and I don’t see it going to end anytime soon.