The Dollar Index continues to decline with the accumulated losses for the week now exceeding 1.1%, while the euro climbed to $1.16 for the first time since October 2018. Risk-on endures, despite the apprehension generated by the escalation in tensions between China and the USA. The closure by the American authorities of the Chinese consulate in Houston is seen as an escalation in the latent conflict between the world’s two largest economies, which many analysts believe will invite retaliation from Beijing.
However, for the time being, investors appear to be focused on the positivity of the last few days, following the approval of the EU recovery fund, good progress being made in the quest for a COVID vaccine and the latest survey of German consumer confidence that surprised to the upside.
Ricardo Evangelista – Senior Analyst, ActivTrades
If there is a new correction on stock markets, gold is expected to be a perfect store of value. Investors are betting against central banks as they think that currencies are now hyper-diluted compared with bullion. Gold, different from the greenback and other currencies, cannot be printed and investors are buying it in vast quantities, driving both the spot price and futures to less than $50 away from their highest ever levels.
The trend remains strongly bullish, even if some technical indicators are now showing gold as hyper bought, reflecting how quick the recent rally was. At this stage, there is no correction signal, while the weakening of the greenback is further boosting gold’s rally.
Carlo Alberto De Casa – Chief analyst, ActivTrades