The topic of competition between the yellow metal and the US currency does not appear too often in analytics, since both instruments are so self-sufficient that they require separate research. Contrasting gold and USD is a difficult task, and the more interesting it is to understand this issue.
The gold market continues to amaze investors. Last week, it updated its current highs, rising to $ 1,829.80 per 1 troy ounce. According to some analysts, there is no significant difference between this value and the previous "gold" peak of $ 1920.70 per ounce, achieved several years ago. Experts in the precious metals market are sure that heights are quite reachable in both cases.
The yellow metal, at its peak last week, was a stone's throw from the new record. It lacked less than $100 to a maximum of nine years ago. This week, the precious metal demonstrates a multi-directional motion vector, leaning either downward or gaining height again. These differences are not reflected in the dynamics of gold in the best way. On Wednesday, July 15, the precious metal is trading in the range of $1812.90–$1813.10 and can not yet reach the level of last week.
According to experts, an important sign of a "bullish" trend fixed in the precious metals market in the early 2000s is the dynamics of the value of gold denominated in different currencies. It can be recalled that yellow metal is an integral part of the Reserve of Central Banks along with leading currencies (USD, EUR) and other assets.
For several years, global regulators have actively replenished stocks of "solar" metal, most often denominated in dollars. It should be noted that the dollar and gold are antagonists: when the price of gold rises, the US dollar becomes cheaper, and vice versa. According to experts, USD is the last barrier to the final dominance of precious metals. The dollar is the only currency that has not reached a record low against gold and has not dropped under its pressure. However, many analysts believe that this last fortress of the financial market will soon decline.
To date, gold has peaked against all world currencies except the dollar. Last year, a victorious procession of gold across the entire financial market began. As a result, this metal has updated highs in relation to most currencies. In August 2019, gold overcame the peak of six years ago against the euro (€1,377) and has continued to strengthen since then. Recently, the maximum value of precious metal in relation to the "European" currency was fixed near €1600 per 1 ounce. The situation is similar with respect to the pound: in July 2019, gold exceeded the 2011 peak at £ 1,124 per ounce. At the moment, the precious metal in conjunction with the pound has risen in price even more - up to £ 1450 per 1 ounce.
The history of the strengthening of gold against world currencies continued along with the Canadian dollar. In June 2019, the precious metal was trading at CAD $ 1,786 for 1 ounce. The breakdown of this level paved the way for CAD $ 2450 - a record recorded last week. Under the pressure of brilliant metal, the Australian dollar surrendered, reaching AUD $ 2590 per ounce. In August 2019, gold updated a seven-year-old maximum against the yen (£ 152,457), and last week crossed the barrier of £ 192,500 per ounce. Last year brought yellow metal a victory over Chinese and Russian currencies: gold reached the next peaks in both the yuan and the ruble. The Swiss franc lasted the longest: the precious metals managed to overcome peak values with respect to CHF only this year.
According to experts, the last financial outpost, US currency, remains to be stormed by gold. Despite the fact that USD is a global reserve currency, this will not save it from surrender. Experts believe that reaching the 2011 high of $ 1920.70 per ounce is a matter of time. In favor of this forecast, the fact that the last eight quarters (from 2008 to 2011), gold has steadily risen in price has shown in favor of this forecast. This trend is currently ongoing.
The key impulse of the growth of the specified metal was COVID-19. The mass exodus of investors in protective assets, primarily gold, raised the cost of precious metals to an unprecedented height. At the moment, gold does not intend to leave its peaks. Moreover, according to forecasts, new records are waiting for it. The currency strategists at The Goldman Sachs Investment Bank are confident that the average price of precious metals will be $ 1,740 per ounce by the end of the current year,, and in 2021, this figure will reach $ 1988 per ounce. The key factors behind the rise in the price of gold will be rising inflation and a weakening US currency.
According to the forecasts of Citigroup bank analysts made before the COVID-19 pandemic, gold will reach $ 2,000 per ounce in the near future, and Bank of America experts went even further, forecasting the precious metal to rise to $ 3,000 per ounce. Many experts do not consider these statements to be unproven, as the gold market is strengthened by the falling major currencies and a high level of confidence in the precious metal. Gold is strengthened by the unprecedented scale of monetary stimulus from Central Banks. In this situation, analysts sum up that the precious metal is an absolute winner.
