Gold's Safe Haven Appeal Remains Strong Over Hopes For More Stimulus

Gold’s Safe Haven Appeal Remains Strong Over Hopes For More Stimulus

Posted Wednesday, September 2, 2020 by
Arslan Butt • 1 min read

Gold prices continue to make gains even after the US dollar strengthened on the back of positive economic data in the previous session, with traders focusing on the economic fallout from the coronavirus pandemic and the implementation of additional stimulus measures in response. At the time of writing, GOLD is trading at a little above $1,964.

The bullishness in gold has been supported by the US dollar falling to a near two-year low over the past few sessions after the Fed revealed its focus on maintaining average inflation and boosting employment in the US. The remarks by Fed chairman Jerome Powell last week indicate that the central bank could hold interest rates at low levels for a longer period of time, and the dovishness has boosted the safe haven appeal of the yellow metal.

On Tuesday, Fed governor Lael Brainard echoed a similar sentiment when he emphasized the need for more stimulus efforts by the central bank, giving more support to gold prices as a result. The precious metal gains whenever central banks turn dovish as low interest rates bring down the opportunity cost of holding gold.

Gains in gold, however, remain limited as the dollar made some bullish moves following the release of encouraging manufacturing data from the US. Manufacturing activity in the US registered the sharpest increase in almost two years during August, as a result of an increase in new orders, indicating progress towards economic recovery.

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