How Strongly Is the US Dollar Controlling Gold?
The DXY Index fell by 0.33% on April 28, 2016. The fall in the US dollar is often beneficial for the dollar-denominated assets, as the assets become cheaper for buyers from other countries.
Gold futures for June expiration rose for the fourth straight day on April 28, 2016. The rise in precious metals was likely triggered by the inaction by the Federal Reserve and the Bank of Japan.
Weakness in the US dollar has historically helped precious metals. As these are dollar-denominated assets, they often rise with a fall in the dollar.
Gold prices have been rising marginally over the past three days. Gold closed at $1,243.40 per ounce on Tuesday, April 26.
The Fed’s call helped silver, which has been the best-performing precious metal, rising by a 25% YTD. The Global X Silver Miners ETF has gained by 82% YTD.
Despite the global market slowdown, Fed members have confidence in labor markets and the US economy but have signaled two rather than four 2016 rate hikes.
The US dollar, represented by the trade-weighted DXY, fell by a whopping 0.65% on April 27, as the Fed announced that it would delay an interest rate hike.
Gold, silver, and palladium saw their prices fall marginally on April 22, 2016. These falls likely occurred due to the relative gains in the US dollar.
When understanding the Chinese markets and their prospects for internationalizing the yuan, it’s crucial to study both onshore and offshore yuan.
With the added support from global partners and the massive gold holdings, China could bring back to life the dead gold standard.
Despite such massive calls for gold in China, its gold holdings as a percentage of total reserves remain as low as 2%.
China’s love for gold is world famous, and demand had touched its peak in 2013 when gold experienced a steep price fall.
Gold prices have been closely tied to the US dollar.
On Wednesday, Archer-Daniels-Midland (ADM), Bunge (BG), and Monsanto (MON) rose 1.7%, 0.56%, and 0.14%, respectively.
The most crucial factor impacting precious metals prices, especially gold and silver, has been the Federal Reserve’s decision on the interest rate hike.
In the past few weeks, fluctuations in precious metals and precious metals–based funds have been influenced by changes in the US dollar.
Indian jewelers have called off their 43-day strike, which began as a reaction to a 1% excise duty on gold jewelry.
China is looking to change the international gold market with its recently established yuan-denominated gold. The Chinese benchmark rate will derived from a 1 kg contract on the Shanghai Gold Exchange.
The US Dollar Index (DXY) has lost about 1.7% on a trailing-30-day basis, as of April 12. Gold has fallen 1.4% during the same timeframe.
Gold gave steady returns to investors for the first two months of 2016 as unrest and instability continued in the markets. However, March started with some ups as well as downs for gold.