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Gold Strengthens as Dollar Weakens, Sentiment Still Bleak

Gold Strengthens as Dollar Weakens, Sentiment Still Bleak

Posted Tuesday, September 1, 2020 by
Arslan Butt • 1 min read

Gold prices are trading bullish early on Tuesday, supported by a falling US dollar even as the safe haven appeal remains strong over expectations that central banks worldwide would stay dovish for longer. At the time of writing, GOLD is trading at a little above $1,985.

The US dollar has weakened to the lowest levels in over two years after the Fed recently indicated that it planned to hold interest low for a longer period of time in a bid to support the US economy. Gold shares a negative correlation with the dollar, strengthening when the greenback weakens as it becomes more attractive for holders of other currencies to purchase the commodity.

Gold has also been gaining over recent sessions due to a rise in the number of coronavirus cases worldwide, raising fears that global economic recovery could take longer than previously expected. With the economy under pressure due to the pandemic, central banks around the world are expected to follow the Fed and remain dovish for an extended period of time, which could support gold prices in the near future.

Weak economic data releases from around the world reveal how countries that are emerging out of lockdown are yet to see business activity rebound to pre-pandemic levels. In addition, the fear of a second wave of coronavirus after lockdown measures are eased also weigh on the sentiment and give gold prices an additional boost.

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