As the Dollar Strengthens, Gold Falls Below $1900

Dollar Strength Continues, Gold Prices See Widening Weakness

[Asia Economy New York=Correspondent Baek Jong-min] The revived value of the dollar is shaking the financial and commodity markets.

On the 23rd (local time) at the New York Mercantile Exchange, the international gold price fell below $1,900 per ounce. December delivery gold closed at $1,868.40 per ounce, down 2.1% ($39.20) from the previous day. This is the lowest price in the past two months.

Recently, gold prices have been battling around the $1,900 mark, but the $1,800 range has become the established trend. This phenomenon contradicts experts' forecasts who expected gold prices to rise further, having reached the $2,000 level per ounce until last month.

[Image source=Reuters Yonhap News]

The factor pulling gold prices down is the strength of the US dollar. Typically, when the dollar rises, gold prices fall. As the situation in Europe worsens, with the UK imposing partial lockdowns due to a surge in COVID-19 cases, the euro has plummeted, strengthening the dollar. The Dollar Index, which shows the value of the dollar against major currencies, soared to 94.44, the highest point in the past eight weeks. Although COVID-19 cases are rising again in the US, the dollar value is recovering from its low point.

The Dollar Index experienced an unusual phenomenon in early March during the initial COVID-19 outbreak, soaring from the 95 level to 103 over two weeks due to a shortage of dollar liquidity.

Since then, the dollar value steadily declined while gold prices showed continuous strength, but the situation is now reversing again.

Meanwhile, US Treasury bond prices, also considered safe assets, moved opposite to the dollar's direction. On this day, the yield on the 10-year US Treasury note rose by 0.015 percentage points to 0.679% compared to the previous day. An increase in bond yields means a decline in bond prices.

Despite the strong dollar, the decline in oil prices was limited. November delivery West Texas Intermediate (WTI) crude oil closed up 0.3% ($0.13) at $39.93 per barrel. Since oil prices are denominated in dollars, a rise in the dollar value puts downward pressure on oil prices.