After a stellar month of January, gold prices surged to two-and-a-half month highs last week, as a tumbling U.S. dollar and geopolitical risks boosted demand for havenÂ
Spot gold (XAU/USD) settled at $1,220.28 a troy ounce on Friday, the highest since November 16. Bullion rose 2.4% during the week after adding more than 9% in January – its biggest gain in seven months.
With last week’s advance, gold is back in bullish territory, based on the Relative Strength Index (RSI) and MACD.
Gold wasn’t the only metal with upward mobility last week. Silver prices posted their sixth consecutive weekly gain to close at nearly three-month highs. Spot silver (XAG/USD) closed at $17.52 a troy ounce on Friday, having gained 2% during the week.
The latest rally in precious metals can be attributed to several factors, including a weaker U.S. dollar, geopolitics and even U.S. monetary policy.
U.S. Dollar Approaches Three-Month Lows
The U.S. dollar has been in a perpetual downtrend since the start of January, helping gold prices recoup massive losses in the final months of 2016. After soaring to nearly 14-year highs at the start of January, the U.S. dollar has declined more than 2% against a basket of other major currencies. The dollar index closed at 99.87 on Friday; two days earlier, it traded at its lowest in almost three months.
Gold is priced in dollars and therefore highly sensitive to fluctuations in the U.S. currency. A weaker dollar makes gold more affordable for international buyers when converting their foreign currency into greenbacks.
The dollar’s recent slump has been largely attributed to U.S. President Donald Trump, who has successfully “talked down†the currency in recent weeks. The President has said the dollar is “too strong†because China was actively keeping its own yuan renminbi weaker.
“Our companies can’t compete with them now because our currency is too strong, and it’s killing us,†Trump said in an interview with The Wall Street Journal.[1]
