Gold price gets comfortable above $2,000 on follow-through buying, weaker U.S. dollar

(Kitco News) - The gold market continues to get a boost from a weaker U.S. dollar, which has fallen to a fresh two-year low Tuesday.

Overnight, gold prices pushed solidly above $2,000 an ounce as it recouped the lost ground from last week’s selloff. December last traded at $2,018.30 an ounce, up 1% on the day.

“Gold has thus gained by around $60 since yesterday afternoon,” said commodity analysts at Commerzbank. “The brightening of sentiment towards gold is also evident from the fact that the gold ETFs tracked by Bloomberg registered inflows again yesterday for the first time in seven days of trading.”

However, the market still has a ways to go to reach its all-time high of $2,076 an ounce.

Meanwhile, the U.S. dollar index last traded at 92.55 points, down 0.28% on the day. Some currency analysts have said that the U.S. dollar will continue to struggle as bond yields have fallen further after recently hitting a one-month high. The yield on U.S. 10-year bonds fell to a session low of 65 basis points overnight.

Analysts at Brown Brothers Harriman said in a note published Tuesday morning that there is a risk for the U.S. dollar to fall below 90 points as recession concerns start to rise.

“DXY is down five straight days and has broken below last week’s cycle low near 92.52,” the analysts said. “After the May 2018 low near 92.243, there are no significant levels until the April 2018 low near 89.229. Delays to the next round of stimulus support our view that the US economy will underperform in Q3, which should translate into continued dollar underperformance as well.”

Along with the weak U.S. dollar and falling real bond yields, commodity analysts note that rising geopolitical tensions between China and the U.S. continue to support gold as a safe-haven asset.

With gold back above $2,000, some commodity analysts are saying that it is only a matter of time before prices push back to new all-time highs.

“Despite last week’s correction, the factors that brought bullion to the dance are still present. Central banks and deficits remain in play, there’s a U.S. election coming up, and tensions with China are getting worse if anything,” Marios Hadjikyriacos, market analyst at the brokerage firm XM, wrote in a note Tuesday.

Last week’s selloff has not done much to dampen the long-term sentiment in the marketplace.

In a recent note, analysts at Citi lifted their short-term outlook for gold, seeing prices push to $2,100 in the next six to 12 months. The analysts added that “breaching $2,300/oz seems plausible.”

“The record pace of ETF investor inflows, a weakening US$ and negative real yields are the primary drivers for the push higher,” the analysts said.