Jakarta, CNBC Indonesia – World gold prices fell 1.6% to below US $ 1,900 / troy ounce overnight. The sharp correction in world gold prices also resulted in a decline in the price of the gold precious metal of PT Aneka Tambang Tbk or better known as Antam’s gold.
Antam’s gold price per gram has plunged below Rp. 1,000,000. On Thursday (29/10/2020), one gram of Antam’s gold precious metal was priced at Rp. 995,000. Antam’s gold price fell by Rp 12,000 or cut 1.2%.
The decline in world gold prices was triggered by the strengthening of the US dollar as reflected in the 0.5% increase in the dollar index. Gold was priced in Uncle Sam’s currency. Gold price movement is inversely proportional to the US dollar.
This means that when the US dollar strengthens against other currencies, the price of gold is depressed because the price of the yellow metal becomes more expensive for holders of other currencies.
At the same time investors who hold gold who buy it at a lower price can take advantage of the increase in the US dollar to realize bigger profits.
The spike in cases of Covid-19 infection in North America and the Continent has made financial markets drop significantly. Early this morning Wall Street’s three major stock indexes fell more than 3%.
The Dow Jones Industrial Average (DJIA) dropped 3.4%. For the more constituent index, the S&P 500 fell 3.5%. Meanwhile the Nasdaq Composite, which contains many technology shares, led the slide with a correction of 3.7%.
Anxiety in the equity market is a result lockdown which returned to prominence made the CBOE volatility index (VIX) as an indicator of fear soared to a position above 40 and marked its highest level since June 12. The yield on 10-year US government debt securities also rose 0.86% on a daily basis.
Since the global central bank implemented an ultra-loose monetary policy characterized by low interest rates in developed countries as well as printing money through quantitative easing (QE), gold and stock movements tend to be in sync.
Gold is used as a source of liquidity to cover margin calls if the price of equity assets. This selling action is what triggered the gold price to fall downward. Adding to the high risk of global uncertainty is the US presidential election which will be held on November 3.
Market players and analysts expect the market to move with high volatility. When the risk of uncertainty due to soaring cases of Covid-19 infection and the presidential election of Uncle Sam, the stimulus that was predicted to stimulate the economy has not poured out.
Policymakers in the US, namely the Government (Donald Trump), the Democrat Party which controls the House of Representatives (DPR) and the Democratic Party which controls the senate actually have different opinions about the stimulus so that the ongoing negotiations often stall.
Apart from being blessed by an ultra-loose monetary policy, gold has also benefited from the expansionary fiscal policies pursued by global governments.
The massive injection of liquidity into the economy coupled with a ballooning budget deficit and government debt has made many people choose gold so that the price has increased by more than 20% this year.
CNBC INDONESIA RESEARCH TEAM
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