By Onome Amuge
Gold prices slipped on Thursday morning as a recent surge from cryptocurrencies and a strengthened dollar affected its appeal while investors look forward to the passage of the US stimulus package.
Spot gold shed 0.6 per cent to $1,822.01 per ounce while US gold futures dropped 0.6 per cent to $1,823.90.
The dollar marched onward to a two-month peak on Wednesday while the benchmark 10-year Treasury yields jumped to its highest in three weeks, further hurting the yellow metal as its performance in the last 30 days declined by 6.19 per cent, approximately $120.30.
Gold, according to market reports, has an inverse relationship with the US dollar, which means that gold is expected to fall whenever the value of the greenback rises.
The dollar has recently defied projections pointing to a weaker dollar environment in 2021. Rather, its index has risen 1.3 per cent on a year-to-date basis, heaping downward pressure on gold.
According to Michael McCarthy, chief market strategist at CMC Markets, a UK-based financial services company, the rise in dollar yields is an indication that the central banks are working on how they will lift the interest rates and withdraw stimulus rather than the other way round.
Investors’ focus are currently centred on the Bank of England policy decision due later today as well as a $1.9 trillion US covid-19 aid plan, which was pushed by the US House but yet to gain Republican support.
Analysts assert that the approval of more fiscal stimulus to help the US economy recover from the pandemic is likely to inflate the prices of goods and services which will in turn, weaken the dollar’s purchasing power and demand, eventually boosting gold prices.