Price Of Gold

Price Of Gold – In order to explain what happened to the price of gold in 2021, it is worth considering what the price of gold did at the end of 2020. Gold prices hit an all-time high of $2,073 in early August 2020 amid security fears. and the beginning of this crisis, the decline of the US dollar, the increase in quantitative easing measures by central banks and the decline in US interest rates.

The price of gold then fell for seven months, reaching $1,677 in early March 2021, down 19.1%. Fears of prolonged shutdowns, collapse of the global economy, and underperforming stock markets began to subside as the global economy and stock markets began to recover. The heat later started to come from the price of gold. Declining global gold consumption, led by subdued global demand for jewelery and central bank gold hoarding, further contributed to the gold price’s seven-month decline (see chart).

Price Of Gold

Technically, gold’s decline from the August 2020 all-time high and most of the 2021 trading range can be seen as a long-term consolidation pattern towards the August 2020 historical gold price. $2,073 (see chart). ).

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During 2021, consumption of gold jewelry began to pick up and central banks began to increase their gold holdings (see chart above). Although the quarterly amount of gold consumed by traditional gold buyers has not yet returned to the quarterly level of gold consumed in the years before the gold price peak in August 2020. In addition to gold consumption, two other main factors also greatly influenced the price of gold in 2021.

First, rising US inflation led to a sharp fall in real (adjusted) US 10-year bond yields. Historically, falling US real yields have supported gold prices.

Second, after hitting near three-year lows in early January 2021, the US dollar (USD) began to strengthen rapidly throughout 2021. The strengthening and growing US economy helped the USD rise. Also significantly strengthening the US dollar in 2021 is the discovery that the US economy does not need more stimulus and that the Fed’s next rate move is likely to be a rate hike.

As part of the tightening of monetary policy, the Fed began reducing its asset purchases by $15 billion per month in November 2021, and then doubled the rate of reduction to $30 billion per month in mid-December. Historically, the price of gold has had an inverse relationship with the USD. So when the dollar began to rise sharply in mid-2021, the price of gold began to decline, and on August 9th, gold prices fell sharply to test gold’s 2021 low. The strengthening of the US dollar in the second half of August allowed the price of gold to recover as US real yields fell further due to accelerating US inflation.

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The dollar and US real yields were dragged down by the strengthening and weakening of the US economy. Recent measures of fiscal stimulus and spending have begun to fade. US ten-year bond yields began to fluctuate based on economic data and the threat of government restrictions following the spike in Covid cases. The rise and fall of the ten percent level of the US bond yield in the second half of 2021 had the greatest impact on the real yield of the US bond, the USD, and the price of gold.

Looking ahead to 2022, it is almost certain that the Fed will raise interest rates at some point. Interest rate markets are currently pricing in the Fed’s first rate hike in early to mid-2022. Historically, the US dollar has lost some ground when the Fed raises interest rates. If the USD loses some ground, it should help the gold price. But rising official interest rates are slowing inflation and putting downward pressure on the US economy and US ten-year yields. If inflation falls faster than nominal yields, US real yields will rise and the price of gold will come under downward pressure. In conclusion, the price of gold after 2022 may look similar to the second half of 2021.

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(News) – The importance of traders and investors studying long-term price charts – even if one is a short-term trader – cannot be overemphasized. History shows that trending prices tend to rise to long-term historical highs or lows as seen on monthly or weekly charts. See the monthly continuation chart of nearby Comex gold futures to see how prices have been trending since 2015. A flag pattern is also forming on the monthly gold chart. Gold bulls should be strongly encouraged by the outlook for their metal over the next few years, according to the long-term price chart.

Disclaimer: The opinions expressed in this article are those of the author and do not necessarily reflect the opinions of Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Metals Inc. nor the author can confirm this accuracy. This article is strictly for informational purposes only. This is not an invitation to exchange products, securities or other financial instruments. Metals Inc. and the author of this article are not responsible for any loss and/or damage resulting from the use of this publication.

Gold’s SWOT: While Fed Chair Powell hints at lower rate hikes, gold continued to rise last week. CFD trading may not be suitable for everyone and may result in losses in excess of your deposits, so please ensure you fully understand the risks involved. CFDs are utility products. CFD trading may not be suitable for everyone and may result in losses in excess of your deposits, so please ensure you fully understand the risks involved.

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The gold trade began in Egypt in 3100 BC. Today it is considered a popular inflation hedge. Learn more about this precious metal’s relationship to inflation and how to start trading it.

Additionally, environmental factors such as inflation, changes in government, government scandals, elections, and wars (which cause market volatility) also affect the price of gold.

The price of gold is linked to the value of the US dollar, as the metal is denominated in dollars. A stronger US dollar tends to keep the price of gold lower and more under control, while a weaker dollar causes the price of gold to rise due to increased demand (since more gold can be bought when the currency is weak).

In uncertain economic times, such as a recession, more people are drawn to gold because of its lasting value. Called a “safe haven” by traders during turbulent times, when yields on bonds, stocks and real estate fall, interest in gold positions can increase, driving the price higher.

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