Gold and Copper Climb as Dollar Weakens With Eyes on Inflation - Bloomberg
From Bloomberg:
Gold and copper surged as the dollar weakened amid signs that interests rates may remain low, boosting inflation expectations as Joe Biden begins his first day as U.S. president.
The Bloomberg Dollar Spot index extended declines for a third straight day on Wednesday, supporting prices of commodities priced in the greenback. Stocks rose and bond yields tied to inflation expectations held gains from Tuesday, when Biden’s Treasury Secretary nominee Janet Yellen said that a slew of state spending was needed to fight the Covid-19 pandemic, while playing down concerns about the debt it creates.
“Precious metals were supported above all by a weaker U.S. dollar, which fell further on the back of renewed strength for stock markets,” Fawad Razaqzada, a market analyst at ThinkMarkets, said in a note. “The path of least resistance is now to the upside again,” with gold trading above last week’s high and finding support above its 200-day moving average, he said.
Yellen’s Tuesday testimony was key in weakening the dollar while lifting gold and base metal prices, according to Commerzbank analysts Carsten Fritsch and Daniel Briesemann. Copper had additional support on signs of greater risk appetite, the bank said. Industrial metals have been helped by expectations of increased Chinese and U.S. demand as Covid-19 vaccines continue to be be distributed and economies recover, ramping up spending on raw goods.
“The metals prices are supported by the further rising stock markets, which express the high risk appetite of market participants,” Briesemann said. “This is fed by hopes that economic life will return to normal with the vaccinations that have now begun.”
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