Prices on the precious metals market gradually increase on Wednesday amid the noticeable retreat of the US dollar. The greenback is getting cheaper against a basket of the world's six major currencies, which is enough for gold to regain lost ground again.
The price of gold futures contracts for February delivery on the electronic trading platform in New York immediately gained 0.85% or $15.7, which allowed it to move to a new level at $1,859.9 per troy ounce. At the same time, it is worth noting that the support level of the metal was $1,817.1 per troy ounce, and the resistance went to the level of $1,929.6 per troy ounce. Recall that the previous trades recorded an insignificant reduction of positions of the precious metal.
Silver futures contracts for March delivery are also rising. The morning rally was 0.79%, which helped the metal to take a position at $25.637 per troy ounce.
The price of copper futures contracts for delivery in March slightly gained 0.07%, which allowed it to move to the level of $3.6415 per pound.
The most significant factor that is traditionally able to support the precious metals market is the negative trend in the foreign exchange markets, in particular, the decline in the US dollar. This is exactly what is happening now, which immediately affects the mood of investors and the value of gold. The weakening dollar makes the precious metal more available for purchase to those market participants who are holders of other currencies of the world.
News about the possible expansion of the fiscal stimulus program in the US also has a positive impact on gold, as for the US dollar, this also means an aggravation of the already quite serious crisis. Recall that earlier, President-elect Joe Biden made an appeal, which, among other things, contained information that he intends to significantly increase cash injections into the country's economy since only this can make it move to a more rapid and sustainable recovery. Moreover, the increase in funding will amount to trillions of dollars. Of course, market participants immediately reacted to this promising statement. The precious metals market has even more prospects for growth in the medium and long term.
The stimulus that Joe Biden wants to ratify will certainly increase inflationary risks, which is a very good sign for gold. Investors will rush to move their assets to a safer sector, which is the "safe haven" of gold.
Moreover, some analysts argue that the growth of metals is quite possible in the short term, and the decline that happened earlier was nothing more than a correction and is no longer relevant for the markets. Now, the main focus is on the decision of the US Federal Reserve System, on which, in fact, the entire course of further events will depend.
In addition, market participants are waiting for fresh statistics on the level of inflation in the United States. Recall that for the country this is one of the most important indicators, on which the main decisions of regulators depend. Monetary policy, however, is unlikely to change in the near future. According to preliminary data, the annual inflation rate for the last month of 2020 in America may reach 1.3%, while a month earlier it was at 1.2%. However, these changes should not be taken into account, as they are not able to radically change the entire monetary policy.