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Gold Prices Ease Lower as US Dollar Regains Strength

Gold Prices Ease Lower as US Dollar Regains Strength

Posted Tuesday, January 26, 2021 by
Arslan Butt • 1 min read

Gold prices are sliding lower in early trading on Tuesday, hurt by the recent strengthening in the US dollar, which shares a negative correlation with the precious metal, over the possibility of a delay in the next round of fiscal stimulus in the US. At the time of writing, GOLD is trading at a little above $1,855.

The safe haven appeal of gold took a hit as latest news reports indicate that the Biden administration could take longer to finish negotiations on the next round of stimulus measures worth $1.9 trillion. Republican lawmakers have raised objections against the proposal and are calling for a smaller package focused on vaccine rollout instead of financial aid instead.

The possibility of more stimulus sends gold higher as it is seen as a hedge against inflation – in this case, the possible delay has weakened the appeal of the yellow metal among investors for now. This sentiment has sent the US dollar higher against other major currencies, keeping gold prices in check as the metal becomes more expensive for non-dollar holders to purchase.

However, losses in gold remain limited as markets remain concerned about the continued spike in coronavirus cases around the world despite the rollout of COVID-19 vaccines. Traders are especially worried about the situation in China where a recent resurgence in cases has prompted authorities to impose lockdowns once again, hurting the possibility of economic recovery.

 

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