Gold prices increased in Asia on Thursday following a reversal of the initial small gain in the dollar index. It then preferred the physical buying of the greenback-denominated commodity.
Investors continued to consider the possibility of a switch in the US strong dollar policy by the US Treasury Secretary Steven Mnuchin overnight. This was another contributing factor to the index’s downfall.
Gold futures for February delivery on the Comex division of the New York Mercantile Exchange climbed to $1,358.90 per troy ounce or 0.19 percent. The US dollar index on the other hand slid to 88.97, falling by 0.06 percent.
Gold for April delivery rose 1.5 percent and settled at $1,361.40 per troy ounce on Comex in New York.
Holdings in exchange-traded funds backed by the precious metal rose to the highest since May 2013. The dollar then dropped against trading partners to its lowest level since 2014.
“Gold has again started the year impressively,” said chief economist Jordan Eliseo. He then added that there are higher levels of demand being seen across the precious metal field.
In other metals trading, silver rose by 0.15 percent at $17.52 per troy ounce. Platinum was able to climb 0.45 percent and traded at $1,020.4 per troy ounce. Paladium on the other hand traded lower at $1,100.65 per troy ounce, dropping 0.52 percent.
Copper was steady at $3.227 per pound.
Dollar Continuously Weakens
The US dollar index is used to measure the greenback’s strength against a traded-weighted basket of six major international currencies. It was last at 89.04 after its overnight low of 88.62.
A weaker dollar most often leads to a boost for the gold prices thru making the metal cheaper for holders of other currencies.
The dollar dropped lower following Mnuchin’s statement that “a weaker dollar is good for trade.” He made the statement at the World Economic Forum in Davos which was held on Wednesday.
The remarks were taken by markets as a withdrawal from the traditional US currency policy.
Mnuchin’s comments were not the only reason for the drop. President Donald Trump decided this week that import tariffs will be imposed on washing machines and solar panels. This decision reignited concerns over his administration’s protectionist stance, bringing to mind possible impact in global trade.
President Trump is set to deliver a speech on Friday in Davos. Investors are concerned that he will use the opportunity to state a more protectionist policy stance.