The price of gold soared on Monday which is largely due to the weakening of the US dollar. The greenback continues its decline, as investors began to buy riskier currencies. This is largely due to the vote in the US House of Representatives, which approved the initiative of President Donald Trump to raise the amount of relief payments to households: the initially agreed amount of $600 was increased to a quite significant $2,000 (we are talking about a new package of assistance to combat coronavirus).
The US House of Representatives voted on this issue on Monday, which resulted in the majority of votes in favor of raising the amount of one-time assistance to citizens to $2,000. It is not yet clear whether this new version of the stimulus and government spending bill will be approved in the Senate. The latter is under the control of Republicans, and they have traditionally opposed the increase in payments. But it is worth admitting that they are under pressure from both sides. However, the increase in payments will provide more effective support for citizens' spending in the short term.
The spot price of gold on the background of this news rose by 0.11% to $1,876. 85 per troy ounce. On Monday gold prices rose 1.3%
The dollar exchange rate against a basket of major world currencies fell by 0.32%, trading near the level of 90.00
The weakening dollar favors the growth of gold, but most of the positive news for the precious metal, such as US incentives, is already embedded in the existing value. The risk of a decline in quotes is very high, because new data on the number of coronavirus cases may well provoke market participants to buy up the traditionally more reliable dollar.
Nevertheless, gold this year proved that it still has the status of a completely reliable investment asset. The decline in rates in the US dollar, as well as the growth of uncertainty, determined increased demand and, as a result, a powerful rally that lasted until the fall. The price of gold even updated the historical high, reaching $2,075 per ounce. However, in the future, profit-taking quickly turned into a sell-off, and the volume of gold in physical ETFs began to show an active reduction.
Over the past week, gold was trading at $1,880 per ounce (that is, about 25% higher than similar levels a year earlier). The volume of gold in physical ETFs has also normalized, meaning that investors' attitude to gold is not unambiguously negative at the moment. In general, we can say that the current year has been very successful for gold quotes.
