18.01.202115:05 Forex Analysis & Reviews: Gold and silver futures sank, but prospects for both metals remain good

Exchange Rates 18.01.2021 analysis

Prices on the precious metals markets sank this morning due to the serious strengthening of the US dollar.

Gold futures contracts for February delivery on the electronic trading platform in New York slightly lost 0.11% or $2, to $1,827.9 per troy ounce.

In contrast, silver futures contracts for March delivery, on the other hand, have not yet felt negative pressure and has strengthened by 0.27%, to $24.925 per troy ounce.

At the moment, the most serious factor that has a direct impact on the precious metals market remains the US dollar exchange rate. Despite the political instability in the country, the greenback continues to move up, although with varying success. Over the past week, its increase was noted, which eventually led to an increase in the USD index against a basket of six major currencies of the world by 0.8% at once, which is a fairly significant increase. Thus, the dollar index reached 90.8 points, which significantly worsened the mood of investors in the precious metals market. Recall that the appreciation of the dollar makes the value of precious metals, including gold, higher for those market participants who are holders of other foreign currencies. Accordingly, demand begins to fall.

However, the US dollar still failed to completely collapse the precious metals market, as there are a number of significant factors that restrain the fall of gold and the growth of the currency itself. In particular, we are talking about the complex epidemiological situation of coronavirus infection. Recent statistics on the increase in the number of new cases of the disease suggest that it is not yet possible to cope with the pandemic. Moreover, after the New Year holidays, the situation is only getting worse. According to the latest data from Johns Hopkins University, the total number of COVID-19 infections in the world is already more than 95 million people. In addition, during the entire fight against the virus, there have already been more than 2 million deaths. The statistics speak for themselves: the hopes that were pinned on mass vaccination have not yet been fulfilled, and whether this will happen at all is now a big question.

Against this background, the statements of those experts who continue to insist that the medium-and long-term prospects for gold look more than positive look more confident. At least, as long as the US dollar remains structurally in a rather weak position, this state of affairs will not be able to change for sure in the near future. And political instability only exacerbates the negative pressure that will sooner or later affect the dollar.

In addition, some metals on the market show a particularly cheerful mood and significant growth due to external factors. This particularly refers to platinum, which throughout the past year could not boast of significant growth and very difficult to survive the lockdowns associated with the fight against the coronavirus pandemic. However, these are really good times for metal: it is gradually coming to the fore. Over the past three months, platinum has been growing steadily, which even allowed it to overtake palladium in terms of growth rates. Its price has already reached $1,142 per ounce, which is the highest value in the last four and a half years. Platinum began to buy more actively, as many countries began to open their economies, the production of cars and jewelry is growing, and the price of the precious metal is very satisfied with industrial companies. According to analysts, the increase in demand for it will continue in the near future, which will make its cost even higher.

Maria Shablon,
Analytical expert
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