Looking at the performance of gold against the euro
The gold market has seen an impressive rally over the past week. The precious metal has managed to hold key support above $2,550 an ounce. Some analysts say that investors can look at the performance of gold against the euro to figure out where the price of gold will go.
In the spot market, gold was trading around 2,596.02 euros an ounce last night. Gold has gained nearly 7% against the euro for the week. For comparison, gold is currently trading at $2,701 an ounce, up more than 5% for the week.
Some analysts have noted that gold’s moves against the euro were largely driven by growing economic weakness in Europe. The euro fell to a two-year low against the dollar on Friday after the eurozone’s composite purchasing managers index unexpectedly fell to a 10-month low of 48.1.
Disappointing data spurs aggressive monetary easing from the European Central Bank.
"The weakening of the common currency (due to both geopolitical factors and the economic downturn, along with the political crisis in Germany) is a key reason for investors to turn to gold," said Alex Kuptsikevich, Chief Market Analyst at FxPro.
“Gold has surpassed the €2,600/oz mark, recording gains every day this week. The turning point that attracted buyers was when the precious metal touched the 50-day moving average at the end of last week,” Kuptsikevich added.
Jesse Colombo, an independent precious metals analyst and founder of the BubbleBubble Report, is also keeping an eye on gold's gains against the euro. He says gold is still on track to hit new record highs against the US dollar and all other major global currencies.
He pointed out that the threat of a recession is not unique to the eurozone. While some are optimistic that the US economy can avoid a recession as President-elect Donald Trump pursues his “America First” agenda, Colombo said he is not yet convinced.
This expert believes that Mr. Trump will likely put pressure on the US Federal Reserve (FED) "to keep interest rates extremely low to boost asset prices and create a boom during his term".
Gold will still increase in price because of money flowing in
Jesse Colombo said the West is losing control of the gold market. He noted that gold hit an all-time high earlier this year when Western investors were “sitting on the sidelines.”
He said rising US government debt will continue to push emerging market countries away from the US dollar and into gold: “So even if Americans lose faith in gold and flock to Dogecoin and other cryptocurrencies, the price of gold could continue to rise,” Colombo said.
Meanwhile, Chris Williamson, chief economist at S&P Global Market Intelligence, said: "Market sentiment improved in November. The prospect of lower interest rates and a more pro-business approach from the US administration after the election fueled greater optimism, which in turn helped boost yields and cash flows.
The rise in the headline PMI suggests US economic growth is accelerating in the fourth quarter, while inflationary pressures are easing," Williamson added.
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