Jakarta, CNBC Indonesia – World gold prices fell sharply on Friday (8/1/2021) trading, until they returned to below US $ 1,900 / troy ounce. United States dollar (US), which rose from the lowest level in more than 2 years to make gold under pressure.
Launching Refinitiv data, gold fell by 1.54% to US $ 1,883 / troy ounce in the spot market. The position improved, at 15:40 WIB it was at the level of US $ 1,890 / troy ounce, weakening 1.18%.
Earlier this week, or at the opening of trading in 2021, the world gold price immediately skyrocketed 2.4%, the day after that it again rose 0.36% to the range of US $ 1,950 / troy ounce, which raised hopes that the world’s gold upward trend would continue, and return to over US $ 2,000 / troy ounce.
However, in trading last Wednesday, the world gold price fell by 1.63% and yesterday fell again by 0.33%, and continues to decline today.
Gold prices have turned lower due to the US dollar which has risen from its lowest level since March 2018 in the last 2 days. The index, which measures the strength of the US dollar, rose 0.33% yesterday. While this afternoon it strengthened 0.34% to above the 90 level.
Expectations of a revival in the US economy this year, as well as increases yield US bonds (Treasury) triggered the rise of the US dollar index.
The pressure on gold will be even greater if the US employment data due tonight shows a recovery. The labor market is an indicator of the health of the US economy, and will influence the monetary and fiscal policies that will be taken. The two policies are the fuel for gold to strengthen.
In addition, statements by US central bank officials (Federal Reserve / The Fed) that show optimism for economic recovery are making the US dollar “rage”.
“I am compelled to see an increase in the inflation expectation indicator … That’s what we are trying to help,” said Thomas Barkin, president of the Richmond Fed in an interview with Reuters on Thursday.
In a different place, the President of the Fed St. Louis, James Bullard said that all the factors that will trigger inflation already exist, from monetary and fiscal policies. Bullard said currently fiscal policy is very powerful, and there will likely be more during the reign of Joseph ‘Joe’ Biden.
Seeing the statement by the Fed official, gold actually has the opportunity to strengthen again, because inflation is predicted to rise and the possibility of additional fiscal stimulus. Gold has traditionally been a hedge against inflation, when inflation accelerates, the demand will increase.
But on the other hand, the expectation of an increase in inflation has triggered the strengthening of the US dollar, because if inflation continues to soar, the Fed may consider starting to reduce the value of its asset purchase program (quantitative easing/ QE) which is currently valued at US $ 120 billion per month.
A stronger US dollar puts pressure on gold, as well as a reduction in the value of QE. So that the price of gold is likely to fluctuate in the short term.
CNBC INDONESIA RESEARCH TEAM
(pap / pap)
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