Jakarta, CNBC Indonesia– World gold prices in trading this week (March 8-12) started to rise after racing 1.50% to the level of US $ 1,726.40 / troy ounce although it had fallen below its psychological level of US $ 1,700 / troy ounce.
Gold prices had experienced a severe correction at the beginning of the trading week after the ghost of bond yields resurfaced bonds The United States with a 10-year tenor has increased its yield again. Even early last week, it almost touched the 1.5% level again.
The impact is that the price of gold earlier this week fell below its psychological level of US $ 1,700 / troy ounce or to be precise at the level of US $ 1,681.24, which was a correction of 1.15% on Monday’s trading.
Uncle Sam’s Domestic Bonds are gold’s main enemy. Asset safe haven it has a negative correlation with gold. When yield up then gold will tend to fall.
Relationships between assets safe haven it was formed because of its history and economic calculations. Gold is a commodity that does not provide returns. Like currency, gold is not like stocks that pay dividends or bonds that pay coupons.
Thus the investor’s interest in holding this asset is largely determined by the opportunity cost. When bond yields rise, the opportunity cost of holding gold increases as well. As a result, gold became less attractive at the start of this trading week when yields shot up,
Meanwhile, the rise of gold prices ahead of the weekend, of course, could not be separated from President Joe Biden who had just signed a stimulus package of US $ 1.9 trillion (equivalent to Rp. 27,000 trillion, exchange rate of Rp. 14,000 / US $) which arrived a day earlier than expected.
This package includes a direct check for US $ 1,400 or the equivalent of Rp. 20 million which is predicted to increase market liquidity.
A total of US $ 400 billion from the package is for Direct Cash Assistance (BLT). This is valued at US $ 1,400 for residents under US $ 75,000 / year or couples with a combined income of under US $ 150,000 / year. There is also US $ 350 billion to assist local governments in dealing with the Coronavirus Disease-2019 / Covid-19 pandemic including the distribution of vaccines.
“Checks (BLT) are on their way,” tweeted Biden on his @POTUS Twitter account.
With the signing of this fiscal stimulus package, later when the funds are disbursed, of course, it will increase market liquidity and cause the amount of dollars in circulation to increase so that its value will decrease.
This of course will benefit assets that are priced in dollars, one of which of course is spot gold.
With the signing of this stimulus, the price of gold in the spot arena slowly went up and even spot gold had climbed more than 2% on Tuesday’s trading.
CNBC INDONESIA RESEARCH TEAM
(trp/trp)
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