An agreement by officials at the G20 meeting to stop devaluing currencies, has placed downward pressure on the dollar, while gold prices have rebounded. A second round of quantitative easing is estimated to begin in November, which could help commodities like gold. See the following article from The Street for more on this.
Gold prices were popping Monday afternoon after the meeting of G20 finance ministers and central bank governors in Korea this weekend conveyed to investors the likelihood that the dollar would come under continuing pressure; and even as existing-home sales were reported to have climbed in September.
Gold for December delivery was up $16.40 to $1,341.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Monday has traded as high $1,349.50 and as low as $1,329.30.
Gold prices were rebounding after a period of book squaring leading into the G20 meeting.
The U.S. dollar index was falling 0.5% to $77.06, while the euro was up 0.3% to $1.40 against the dollar. The spot gold price was rising more than $13, according to Kitco’s gold index.
On Monday, the U.S. dollar was re-experiencing downward pressure after finance ministers and central bank governors at the G20 meeting agreed not to pursue further currency devaluations. However, they didn’t reach a consensus on the outlining objectives for shrinking trade imbalances — proposed by the U.S.
“The G20’s hardened stance towards exchange rates has been has been interpreted as dollar-negative and should now defer further talk of ‘currency wars,’ and with it the threat of concerted central bank action to stem the downward moves in the dollar and take the heat out of the fast appreciating emerging market currencies,” RBC Wealth Management’s senior vice president and financial consultant George Gero explained in a report.
“With this threat receding for now, it makes further downward moves in the greenback more likely, in view of the fact that pretty much everyone expects the U.S. to now announce its second round of quantitative easing, thus injecting some much-needed inflation (bullish for the commodities).”
Still, Gero noted that RBC believes that the dollar decline is losing steam and will recover value towards the end of the year, whether or not another round of quantitative easing occurs.
Gold and Energy Advisor’s James DiGeorgia said though the dollar is under pressure, it looks like it’s beginning to consolidate. “There is long-term support at the 76 level. The dollar could consolidate here,” he said in a report.
DiGeorgia added that consolidations can remain from one to three months. The driver of the next decline could come when the Fed begins its second round of quantitative easing, anticipated to begin in early November, he said.
Gold remained firm in positive territory even as the National Association of Realtors said existing-home sales climbed 10% in September to 4.53 million from 4.12 million in August, exceeding expectations for September sales of 4.25 million, according to Briefing.com.
On Monday, Fed Research chairman Ben Bernanke spoke at a housing and foreclosures conference in Virginia. A key takeaway: Bernanke said next month U.S. financial regulators will be releasing a report scrutinizing foreclosure procedures at financial institutions.
However, he did not take any questions after his remarks and didn’t make any direct references to monetary policy.
In a daily report, EverBank World Markets president Chuck Butler said he was surprised by the sell-off in gold and silver last week because he’s been of the view that the widely talked about “currency war” would bolster the metals as they retained wealth and currencies went to zero. “Hmmm. Confusing,” Butler said. “But confusion only leads to clarification. So just stick with the diversification plan, and you’ll be able to ride out confusion that sets into the markets every now and then!”
Silver prices were up **55 cents at $23.67,** while copper was up 7 cents to $3.86.
Gold mining stocks, a risky but profitable way to buy gold, were trading in positive territory Monday afternoon.
Goldcorp.(GG) was rising 1.8% to $42.80, while AngloGold Ashanti(AU) was advancing 1.7% to $46.67. IAMGOLD(IAG) was adding 2.7% to $17.84 and Market Vectors Junior Gold Miners ETF( GDXJ ) was gaining 3.4% to $35.08.
This article has been republished from The Street. You can also view this article at The Street, an investment news and analysis site.