The increase in US inflation, the weakening of the US dollar, and the Russian-Ukrainian escalation underlie the increase in gold prices in the trading session tonight.
Gold prices continued to strengthen slightly after a one percent jump in yesterday's trading session. Spot gold was up 0.1% at $1841.45 an ounce, while gold futures on the Comex New York were fairly stable and traded at $1842.60. The following chart of XAU/USD also shows a bullish move at $1841.10 on Thursday (20/January) tonight.
Three Factors Supporting Gold Prices
Market observers consider that one of the important factors that support the price of gold this time is rising inflation. Daniel Pavilonis, strategist at RJO Futures said, "The market seems to want gold prices to continue rising. This has been met, especially with more data showing that inflation (rise) is not temporary."
The US economic data released tonight is the weekly Jobless Claims. A total of 286K people filed for unemployment benefits last week, up from the previous period and higher than expectations for a decline in claims to 227K. Meanwhile, US Existing Home Sales fell from 6.48 million to 6.18 million housing units. The US Dollar Index also slipped to 95.6 after the data.
"We are looking for a pause (gold) to take a breather after yesterday's big gains. The strengthening of gold prices in the market is finally leading to what we have been hoping for for a while, which is using gold as a hedge against inflation," said Ricardo Evangelista, analyst at ActivTrades.
In addition, the escalating Russia-Ukraine escalation is also a factor that supports the strengthening of gold prices. Although Russian President Vladimir Putin has often called for a peaceful way to resolve the political conflict with Ukraine, recent reports suggest that Moscow has deployed more troops to the Kiev border region.
According to Commerzbank analysts, gold's two-day rally is closely related to supply problems caused by Russia-Ukraine tensions. Potential sanctions from the Western bloc on Russia, which is one of the world's largest palladium producers, could lead to an export ban. In fact, palladium is an important material component in the automotive industry.
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