Gold price rises as U.S. dollar weakens

By Swann Collins, investor and consultant in international affairs – AssetsforWealth, March 3, 2023

Gold prices have registered gains on Friday amid a weakening U.S. dollar, which has grown actively since the beginning of the year.

Quotations of April gold future contracts on the New York Comex Exchange reached $ 1857 per troy ounce at the closure.

Silver for delivery in May rose in price by 1.3% and costs $ 21.18 per ounce.

The ICE index, which shows the dynamics of the dollar against six currencies (euro, Swiss franc, yen, Canadian dollar, pound sterling and Swedish krona), loses about 0.3% during trading. Since the beginning of the year, the indicator has grown by 1.2%.

The U.S. dollar has retreated from annual highs, but remains quite strong. More importantly, the yield on US government bonds continues to grow and is above 4%.

Euro area annual inflation is expected to be 8.5% in February 2023, down from 8.6% in January according to a flash estimate from Eurostat, the statistical office of the European Union.

U.S. consumer price index data showed that prices for a range of goods and services rose by 6.4% in January, down slightly from an annual rate of 6.5% in December and a 40-year high of 9.1% in June. 

The World Gold Council reported on March 2 that central banks gold demand in 2023 picked up from where it left off in 2022. In January, central banks collectively added a net 31 tonnes (t) to global gold reserves  (+16% m-o-m). This was also comfortably within the 20-60t range of reported purchases which has been in place over the last 10 consecutive months of net buying.

The yellow metal has always been an excellent hedge against inflation because its price rises when the cost of goods and services rises. Gold can effectively store value over time, when paper money such as the dollar or euro loses purchasing power due to inflation. Gold is a resilient asset that resists the erosion of inflation and preserves wealth in the medium and long term.

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© Copyright 2023 – Swann Collins, writer, investor, and consultant in international affairs.

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