On April 4, 2023, the price of gold broke through the $2,000/oz. price level and traded in that range during the following weeks. Meanwhile, the outlook for the dollar has weakened. Analysts say this reduced outlook has increased the popularity of physical gold and helped push prices of the precious metal close to an all-time high.
The dollar’s power relative to other currencies has recently declined.
The price of the dollar has cooled against competing currencies. Traders’ expectations for lower interest rate hikes from the Federal Reserve and potential rate cuts have led to the dollar losing ground against the euro, yen, and other currencies, according to Business Insider.
The dollar has also faced increased competition from the yuan in international markets like Malaysia, Brazil, and Saudi Arabia. This movement away from the dollar is a process known as “de-dollarization.”
The dollar’s relative weakness has contributed to higher gold prices.
Gold prices approached an all-time high on the back of weak U.S. economic data. A combination of recessionary signals, a looming debt ceiling, increased expectations for the Federal Reserve to relax interest rates, and a declining dollar have propelled gold to near all-time highs. On April 13, 2023, gold traded at 2,054.90/oz.—less than $18 shy of gold’s all-time high price of $2,072.50/oz. set in August 2020.
Barron’s reports, “Gold is worth more in dollars when the greenback falls.” As the dollar trends downward, some experts believe gold will increase.
Financial analysts have noted gold’s growth and see it continuing.
Ritholtz Wealth Management CEO Josh Brown said, “You just get these moments where people lose confidence in fiat, in the banking system, et cetera, and for whatever reason, religion or otherwise, they reach for gold,” in an April 4, 2023, interview with CNBC.
In a note released on April 5, 2023, Bank of America Managing Director Paul Ciana wrote, “We see gold breaking out of a bullish pennant pattern that favors a continuation of the uptrend that began in [the fourth quarter of 2022].” Ciana also predicted that gold breaking its record high could fuel a long-term rally.
As the dollar weakens, gold may continue to see growth as its popularity increases among traders and portfolio owners.
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