Gold price rises sharply – what the US Dollar has to do with it

Ein Barren Gold

The price of Gold continues to rise. From the beginning of the week until noon yesterday, it was almost chained at $1,770. But then, yesterday there was a jump from 4 p.m. onwards, and today the strength continues up to $ 1,788. But what happened? At first glance, yesterday’s surge in Gold should not have happened at all. Let’s take a closer look.

Good US economic data, Gold price rising

Yesterday at 4pm German time, US consumer confidence was reported much better than expected (here are the details). This helped the Dow Jones up a good 200 points in the following 60 minutes. A better economic expectation helps riskier investments, and is actually poison for the “safe haven” called Gold. But no, strangely enough, the price of Gold rose from $1,770 to $1,784 in the following 60 minutes yesterday from 4pm. This should not have happened based on this data.

But there’s still the US Dollar. The US Dollar Index, a basket of the US Dollar against other major currencies, is a good way to track its development. Also yesterday at 4pm German time, the US Dollar began to weaken strongly. The Dollar Index fell from 97.65 index points from 4 pm to 97.20 to 5 pm. This was a noticeable movement that pushed the price of Gold up. The fact that it jumped 14 Dollars high because of the US Dollar and despite (!) the good US economic data shows the current urge of Gold to rise further. Obviously, one always needs reasons for new upward impulses. Today the precious metal continues to show strength. Right at 2:15 p.m., the ADP data on US unemployment could once again bring movement into the prices!

Analysts’ opinion

Jasper Lawler of London Capital Group points out in his latest commentary that Gold futures contracts crossed the $ 1,800 mark on Tuesday and spot prices were about 12 below this milestone. The Gold price has risen by more than 12 per cent in the last 3 months. This was the best quarter since 2016. Gold had made most of its gains when the US Dollar showed weakness. The direction of the US currency is also likely to determine the short-term direction for Gold, Jasper Lawler said.

Yesterday we talked about the functioning of Gold as a risk off money investment in the big picture. Click here to read yesterday’s article. In the following chart, we see in the middle the rise in the price of Gold yesterday in direct comparison to the falling US Dollar (in blue).

Dieser Chart zeigt den Goldpreis im Vergleich zum US-Dollar
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