Gold Prices Rise as Dollar Weakens, Risk Appetite Improves

Gold Prices Rise as Dollar Weakens, Risk Appetite Improves

Posted Tuesday, August 18, 2020 by
Arslan Butt • 1 min read

Gold prices are making slight gains, strengthening on the back of a weakness in the US dollar which shares a negative correlation with the precious metal, but gains remain pressured by improved risk appetite in financial markets over hopes for economic recovery. At the time of writing, GOLD is trading at a little above $1,992.

The US dollar fell to the lowest level in over a week, driven by a reduction in US bond yields even as economic data releases from the US disappointed traders. The dollar also turned weaker over hopes that US-China trade tensions were receding after both countries decided to put off the six-month review of the phase one deal.

The safe haven appeal of gold, however, remains under pressure as economies around the world show signs of recovery and a pick-up in sentiment in the wake of the coronavirus crisis. Business sentiment among Japanese manufacturers rose to a four-month high, while the German central bank expects the economy to rebound in the coming months.

The yellow metal also saw downward pressure on the back of an improvement in market sentiment, as US equities rallied, buoyed by tech stocks. A rally in stock markets suggests an improvement in the risk appetite among traders, which dents the allure of the safe haven metal and sends it lower as a result.

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