Gold prices rallied sharply on Monday, as the yellow metal shrugged off traditional headwinds including rising bond yields and improved risk appetite en route to fresh ten-month highs.
Price Update
Gold for April delivery climbed $7.70, or 0.6%, to $1,329.80 a troy ounce, its highest level since April on the New York Mercantile Exchange. The contract traded as high as $1,330.80 a troy ounce.
Bullion has been riding a wave of momentum since the fourth quarter began, as a worsening stock-market outlook and global trade tensions weighed on risk sentiment. Since the beginning of October, the yellow metal has rallied nearly 12%.
Silver has followed a similar trajectory as gold. On Monday, the grey metal edged up 5 cents, or 0.3%, to $15.79 a troy ounce. Silver futures peaked at seven-month highs last week.
The gold-silver ratio that is used by investors to determine when to buy and sell precious metals is moving in gold’s favor amid the recent wave of buying. As of Sunday, the ratio stood at 83.83. This basically means that 83.83 ounces of silver are needed to buy one ounce of gold.
Dollar Demand Ebbs
Gold’s ascent on Monday came as demand for the U.S. dollar continued to slide. Since peaking at near two-month highs, the dollar index (DXY) has declined in each of the past three sessions. On Monday, it was down a further 0.2% at 96.71.
The dollar bulls have been in the driver’s seat for the past two weeks, as global trade uncertainty and political turmoil in Europe weakened demand for competitor currencies. A synchronized slowdown in the global economy, particularly in Japan, China and the Eurozone, has also propped up the dollar relative to its peers.
Gold outperformed riskier assets during the fourth quarter and has retained its strength during the stock-market rebound of 2019. The dollar emerged as the haven asset of choice for investors fleeing global economic and political risks. With the U.S. and China making progress on a new trade agreement, stock traders have been able to breathe a collective sigh of relief. Read more: Stocks Surge on U.S.-China Trade Optimism; Dow Notches Eighth Consecutive Weekly Gain.
The U.S. financial markets were closed on Monday for President’s Day. Despite their recent strong performance, stocks may struggle to keep the momentum alive as the S&P 500 Index approaches a key resistance level. The outlook on earnings has also deteriorated, presenting new complications for equity traders.
Additional insights: Does this Chart Spell Doom for the S&P 500 Index?
Featured image courtesy of Shutterstock. Chart via Barchart.com.
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4.7 stars on average, based on 772 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi
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