FXTM: softer U.S. dollar lends some support to gold price

New York (Dec 30)  Gold remains underpinned by a U.S. dollar that “seems to be out of love as we approach the new year,” said Lukman Otunuga, senior research analystwith FXTM. The analyst commented that the dollar index is down by more than 1% from last week’s high and 2.9% from its 2019 peak. “In a classic risk-on environment, gold prices tend to fall but not this time,” Otunuga said. “The precious metal is trading at two-month highs today, mainly driven by the weakness in the greenback.” Otunuga also commented that gold has been supported by the U.S. airstrikes carried out in Iraq and Syria against Iranian-backed groups. “If geopolitical tensions increase in the Middle East, there will be more reasons for investors to increase their allocation in gold; otherwise the gold rally makes little sense while equities are making record highs,” the analyst said. Otunuga later added: “Given that we are in holiday season, expect to see some exaggerated moves in currencies and commodities. Flash crashes also can’t be ruled out when liquidity is thin.” Shortly after 8:10 a.m. EST, Comex February gold was $1.30 higher at $1,512.10 an ounce.

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