Gold stock prices increased for the week but decreased for the month and the quarter
Gold futures rose on Friday, despite growing inflation in Europe and the United States, as the dollar traded below a 20-year high that was hit earlier this week. This was due to the fact that gold futures are priced in dollars.
The value of the precious metal, on the other hand, was forecast to fall not just for the month but also for the third quarter as a whole.
Despite the release of yet another batch of concerning inflation data out of the eurozone, gold has continued to trade near its highest level in a week. This comes just one day after an inflation report out of Germany revealed something similar.
The data from the United States indicated that the personal consumption price index, which is a major barometer of inflation in the United States, climbed a moderate 0.3% in the month of August. Nonetheless, prices are still increasing at the quickest pace in the past 40 years.
Recent shifts in the price of gold and silver have been mostly driven by changes in the value of the US dollar as well as hikes in the yields on U.S. Treasury securities. Both of these factors have contributed to an increase in recent yields on U.S. Treasury securities. In addition, other variables, such as the state of the economy around the world, have also played a part in this development.
According to Jason Teed, co-portfolio manager of the Gold Bullion Strategy Fund QGLDX, -0.05%, the rise in the value of the dollar is the primary factor behind the drop in the price of gold over the last month and over the course of the quarter. He went on to say that if you take a look at the U.S. dollar index over the past three months, you’ll notice that the price of gold stock and the value of currency have been moving in the opposite direction. The rise in the value of the dollar has been a significant factor in the falling price of gold stock during the last month and the past three months.
Gold futures, based on the most active contract, trade around 8% down for the third quarter, while the ICE U.S. Dollar Index DXY has gained 7% during the same time period. On Friday, the dollar index is trading lower than its 114.78-point high from the previous trading session, which was achieved on Wednesday.
According to Teed, who is also the director of research at Flexible Plan Investments, who spoke to MarketWatch, the rise in the value of the dollar can be attributed to the fact that inflation is higher and the Federal Reserve can raise interest rates higher than other developed countries in an effort to bring inflation under control. This makes our currency more appealing.
According to him, predicting the future price of gold is difficult, but there is “extra room” for further price drops as long as interest rates have not yet reached their maximum level.
Teed underlines that he does not anticipate gold continuing to rebound until inflation statistics fall down to a place where the Fed can “take their foot off the brakes” and rates either “discontinue” heading up or drop down; however, he believes this will not happen for a number of months.
According to him, until there is a discernible shift in the trajectory of inflation, there won’t be much of a headwind for gold, and it might signal an advantageous moment to invest in the precious metal.
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