Lately, the Dollar Index has behaved almost like a fear gauge, reflecting the temperature of investors’ sentiment, rising with fear and dipping when optimism dominates.
Over the last few sessions, the index has remained almost flat as the constant tug of war between those believing in a quick V-shaped recovery and others worried about the economic impact of a coronavirus resurgence remains undecided. Later today, sets of crucial data on US PMI and unemployment will perhaps give more clarity and direction for the safe haven dollar.
Gold has rallied to its highest level since late 2011, with futures surpassing $1,800, while the spot price is marking a fresh eight-year high at $1,789. Technically the situation remains firmly bullish with investors betting on further printing activity from central banks, in a scenario where the correlation between the Fed (and other central banks) balance sheets and the gold price remains remarkable.
Despite the recent recovery of stocks, it is clear the economic landscape has been profoundly changed by the pandemic. Investors are showing an increasing need for bullion in their portfolio in order to mitigate any potential risk of both renewed corrections on stocks and strong moves on currency markets. For this reason, it is little surprise seeing these bullish spikes for the yellow metal.
On a separate note it is worth noting silver’s gains with the metal now facing the resistance level of $18.30. The outlook for silver is very positive and a clear climb above the top reached last month could open space for further recoveries.