(Kitco News) - A weaker U.S. dollar and ongoing global growth concerns due to the COVID-19 pandemic are helping the gold market recoup some of last week’s losses.
Gold’s rollercoaster ride continues with December gold futures rallying more than 1% early at the start of the North American trading session. December gold futures last traded at $1,978.20 an ounce. Monday’s rally comes after last week’s rout, which saw gold’s worst weekly performance since March.
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2924175530478188){kind=small}
North American equity markets are seeing a relatively neutral open with the Dow Jones Industrial Average starting the week up 5 points.
A strong positive for the precious metal is continued selling pressures in the U.S. dollar index, which hovers near its two-year low, last trading below 93 points, down 0.15% on the day. Some analysts see potential for further losses in the U.S. dollar in the near-term.
“ [The U.S. dollar index] is down four straight days and the break below 93.05 sets up a test of last week’s low near 92.52,” said currency analysts at Brown Brothers Harriman.
Along with a weaker U.S. dollar, analysts say that gold is also seeing some renewed safe-haven demand following disappointing economic news from Asia. Overnight, Japan said that because of the coronavirus, its economy contracted by nearly 28% in the second quarter, the worst drop in history.
The gold market pushed to a session high in delayed reaction to weaker than expected manufacturing numbers in the U.S. The New York Federal Reserve said its Empire State manufacturing survey’s general business conditions index dropped to a reading of 3.7 in August, down from July’s reading of 17.2. The data was weaker than expected with consensus forecasts calling for a reading around 14.6.
While the U.S. dollar and safe-haven demand are providing some momentum for gold, some analysts have said that gains could be limited as U.S. bond yields are also starting the week higher. The yield on the U.S. 10-year bond is currently trading at 70 basis points, holding near a one-month high.
“The recovery in U.S. yields should limit the appetite in the yellow metal as investors now question whether there is potential for sustainable gains above the $2,000 per oz. Given the mixed feelings, gold could not be a go-to hedge in case of renewed risk-off pressures across the global markets,” said Ipek Ozkardeskaya, market strategist at Swissquote Bank SA.
Although gold prices are seeing solid gains, some analyst note that the market has yet to test critical resistance levels. Analysts at City Index said that unless gold prices can push back above $2,015 an ounce, it would remain in a consolidation phase.
Commodity analysts at Commerzbank said that they also see potential for gold prices to enter a consolidation phase.
