Gold recovers very weakly. Euro awaits fire test
Gold remains near six-month lows under pressure from a rally in the dollar, which currently acts as a safe haven, at a time when investors fear a recession and see the US Federal Reserve (Fed) tighten monetary policy.
The yellow metal rose 0.21% to $1,768.51 an ounce, but remained very close to its December 15 low of $1,764.07 last year. In turn, the Bloomberg Dollar Index, which compares the strength of the green note against 10 competing currencies, is at its March 2020 highs, trading at the waterline (0.03%) to 106.48.
“Gold seems to be in second place against the dollar,” Gavin Wendt said in an interview with Bloomberg. A senior analyst at MineLife explains that “gold has performed well this year, but the recent gains in the dollar have had a negative impact on gold, which is priced in dollars.”
This Wednesday, investors will be keeping a close eye on the release of the minutes of the latest Fed meeting as the market looks for clues that the central bank may raise its key interest rate from 50 basis points to 75 basis points next month. The meeting is scheduled for July 26 and 27.
In the Eurozone, the single currency is at the waterline against the dollar (0.07%) at $1.026, but remains at a 20-year low against the green note. The euro-dollar pair will be put to the test this week as analysts believe it’s only a matter of time before the euro equals the dollar, with some even acknowledging that the single currency could be worth less than the dollar.
“It’s only a matter of time before the euro reaches parity with the dollar,” Neil Jones, head of foreign exchange at Mizuho, said in defense, quoted by Bloomberg. Mario Martins, analyst at ActivTrades, goes further and even admits in statements to Negosios that “it is absolutely possible for the euro to be worth less than the dollar. It’s not an absolute case because it hasn’t happened yet, but it’s almost inevitable at the moment. Very possibly this week.”
