Gold Hits 4 Month High

Gold prices hit a four-month peak on Monday as the U.S. dollar index slumped to its lowest in three years but analysts warned the greenback’s decline could be short-lived as it was not driven by fundamentals.

Spot gold was up 0.3 percent at $1,342.11 an ounce by 1045 GMT after touching its strongest since Sept. 8 at $1,344.44. The precious metal rose for a fifth straight week last week, gaining 1.4 percent. U.S. gold futures were up 0.6 percent at $1,343.20 an ounce.

“The weakness in the dollar is not justified by fundamentals. It’s a little bit weird considering the divergence in monetary policy should play in favour of a stronger dollar,” Capital Economics analyst Simona Gambarini said.

She said the U.S. Federal Reserve is widely expected to raise interest rates, which would favour a stronger dollar, while the European Central Bank should keep rates on hold.

The dollar index was down 0.2 percent at 90.474, having reached its weakest since January 2015 at 90.421.

A lower greenback makes dollar-denominated assets such as gold cheaper for holders of other currencies, while higher rates could dent demand for non-interest-paying gold.

via Kitco

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza