Gold prices ended higher Thursday, finding support as the US dollar weakened.
The decrease in prices in the market has generated tensions. The gold suffered an unusual situation in recent days. The gap between physical pieces of the metal and one in the exchange-traded funds reached up to $80.
The stock brokerage has caused the massive closure of refineries to stop the advance of the Coronavirus. There has been a flood of sales orders to gain liquidity. Investors had to sell gold to cushion their losses in other assets or to provide additional guarantees to maintain separate investments. Many people have been scared by the fact that gold is not always a refuge.
Gold price jumps due to the drop of the dollar
The spot gold price jumped over 1.5% and raised $1,640 an ounce. The weakness of the dollar in the forex market and the possibility that the Fed will continue to relax its monetary stance reinforces the precious metal.
Besides the US currency losses, among other factors, the price of gold was influenced by the disappointing data on the US labor market.
The US government implemented the stringent isolation measures to contain the spread of the Coronavirus. According to the country’s labor department, jobless claims rose to a record 3.28 million last week.
Disruption of activity caused increasing layoffs. It could dramatically inflate the jobless rate in the coming months. The situation would force the Fed to continue loosening its monetary stance to defend the economy and counter the ravages of the COVID-19 pandemic.
A scenario of increased monetary stimulus by the US central bank poses downside risks to the US dollar. At the same time, it creates a more favorable environment for gold.
Generally, when the dollar falls, the yellow metal becomes cheaper in terms of other currencies. It increases the demand for it, and consequently, its price in the financial markets grows.
Another factor that supports gold is supply difficulties due to movement restrictions and border closures. However, clients have the possibility of storing coins and bullion in safes since companies specialized in gold sales tend to provide storage solutions.
Those who prefer to keep the yellow metal at home should be very patient.
JM Bullion, the company, based in the US, says on its website that delivery time is more than 15 business days due to the volume of orders. The strong demand has a positive impact on the company, but also negative ones, as deliveries to the UK are delayed.
Some rumors on Wall street suggest that there is not enough gold in new york to deliver and fulfill Comex-traded futures contracts. In this sense, the lower supply of the precious metal could continue to reinforce its progress in the short term.
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The long-term trend of the yellow metal remains bullish
Gold showed erratic movements in recent weeks. Despite this fact, in the long term, the outlook of the metal remains quite positive, analysts say. They state that the rise to the next resistance at $1703 is not ruled out.