Gold price rises to two-week high as dollar dives

September 1, 2020

London (Sept 1)  Gold prices jumped more than 1% on Tuesday to a near two-week high, following the steepest fall in the dollar in more than two years as investors bet on U.S. interest rates staying lower for longer. Spot gold was up 1% to $1,989.78 per ounce by 1203 GMT, having earlier hit its highest since Aug. 19 at $1,991.91. U.S. gold futures also rose nearly 1% to $1,997.30. "The two drivers for gold are the weaker dollar and lower yields and that will keep the metal moving between the range of $1,800 and $2,100 until the U.S. presidential elections in November," said Robin Bhar, an independent analyst. "However, at the end of every month we might see some corrections as a result of speculators selling their positions." The dollar index dropped to a more than two-year low, making gold cheaper for holders of other currencies. The U.S. Federal Reserve's new monetary policy plan, which may lead to inflation rising marginally and long-term interest rates staying lower, also weighed on U.S. Treasury yields. Low interest rates minimise the opportunity cost of owning

 non-yielding bullion, which is often used as a buffer against inflation and currency depreciation. Gold has gained about 31% this year, also supported by economic uncertainty stemming from the coronavirus pandemic.

While waning consumer demand remains a headwind, "strong investor demand is likely to continue to provide support for gold," Heraeus Precious Metals said in a note. "In the near term, gold could move sideways as it consolidates following its rapid rally to record highs in early August."

Elsewhere, silver was up 2% to $28.79 per ounce, after hitting its highest since Aug. 11. Platinum rose 2.5% to $952.86 and palladium climbed 1.7 % to $2,280.47.


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