Gold prices soar on Monday after three days of decline. According to analysts, the reason for the unexpected positive dynamics is the decline in the dollar against a number of alternative currencies.
The price of June gold futures on the Comex exchange increased by 0.17% to $1,780.85 per troy ounce. Meanwhile, the May contract for silver shed 0.03% to trade at $26.067 an ounce.
Recall that last week, the price of the main precious metal began to fall after approaching the mark of $1,800 per troy ounce, which lasted three sessions in a row. On Monday, the price of gold began to rise, trying to hold above the $1,780 mark.
Today, the weakening dollar provides significant support to the yellow metal. The indicator of the dollar index (the dollar's exchange rate against a basket of currencies of six states - the main trade partners of the United States) dipped by 0.17% to 90.7 points. Traditionally, the depreciating dollar makes gold more affordable for holders of alternative currencies. At the same time, doubts about whether the main precious metal will be able to step over the $1,800 mark remain relevant.
Another factor for the rally of gold prices was the fresh March statistics. According to data for the past month, there is a noticeable increase in inflation in the United States and the eurozone. Such news supported gold prices and allowed them to return to the resistance level of $1,750 per troy ounce.
At the moment, commodity market participants continue to monitor the US dollar and the inflation rate in the United States. So, at the end of March, the last figure reported at 2.6%, which was the highest level since the summer of 2018.
According to analysts, the main factor behind the current growth in gold prices was the indicators of the energy sector, which was significantly affected by the restrictive measures in 2020. However, at present, there is a spectacular recovery in this area of the economy.
As for the leading European countries, there is a similar rise in inflation. And if in the pre-crisis period it did not exceed 1%, then in March of this year this figure increased to 1.3%.
Another cause for concern among investors was the increase in consumer prices, which had a negative impact on household spending. In this regard, citizens are faced with the need to protect personal savings from future depreciation through inflation. Experts predict that in the short term, further growth in the money supply and debt burden will negatively affect the savings of the population around the world.
A clear confirmation of citizens' concern about rising inflation is the increased demand for bitcoin, indicating that people are looking for protective assets for their savings. So, the capitalization of BTC today is $1.1 trillion, and the entire crypto market is about $2.1 trillion.
Large-scale quarantine measures have forced most consumers to cut their spending. The most tangible losses from the covid crisis were suffered by such sectors of the economy as retail trade, tourism, and the restaurant business.
Analysts fear that the active spending of savings by the population after returning to normal life will lead to continued growth in inflation. It is important to remember that the price of gold is tied not only to inflation but to many other factors. However, the growing debt burden in the global financial system will have a decisive influence to support the main precious metal. Therefore, buying gold today will be a profitable decision for the long term.