Sharechat Logo

Focus Gold price hits all-time highs in euro and yen

Monday 17th February 2020

Text too small?

The juggernaut gold market is making its presence felt in currency markets as it hits new record highs against the euro and Japanese yen.

According to some market analysts, the new highs in gold against two major currencies is a further sign of gold's growing investment appeal as a safe-haven asset.

As a non-yielding asset, gold's opportunity costs look attractive as the Germany 10-year yield currently trades around minus 40 basis points. Meanwhile, Japan's 10-year bond offers a negative yield of three basis points.

Marc Chandler, managing director at Bannockburn Global Forex, said that gold does look like an attractive asset compared to European and Japanese bonds. However, he added that the record highs the yellow metal has marked against the two currencies have more to with structural issues in the euro and yen

Chandler noted that the euro has lost significant ground against the U.S. dollar since the start of the year, falling from $1.125 to its latest low at $1.085. He added that the euro still has more room to fall against the U.S. dollar. The euro is trading at its lowest level against the greenback in two years.

At the same time, the U.S. dollar continues to trade at the top of its range against the yen.

"The dollar's rally has been extremely impressive this year," Chandler said. "The rally we see in gold is just a function of weakness in the other currencies."

Mike, McGlone, senior market strategist at Bloomberg Intelligence, agreed that the record highs in gold in other currencies are a reflection of growing weakness in the forex market.

"Currency debasement is typically a primary force for advancing the price of the benchmark store of value, but it's less about the price of gold advancing and more likely reflects the value of paper currency in decline," he said in a report Friday.

However, McGlone said that it could be only a matter of time before the U.S. dollar takes a hit. Although the U.S. dollar has shown impressive strength so far in 2020, it has not shaken bullish sentiment in the gold market. Gold has held critical support around $1,550 in the face of a stronger U.S. dollar.

McGlone said that any equity market correction could be the trigger that pushes gold back to its 2011 all-time highs.

"It may be a matter of time before gold revisits its peak of about $1,900 an ounce, guided by an extension of record highs in the metal when denominated in other major currencies, notably the euro," he said.

Although Chandler isn't paying a lot of attention to gold's move in other currencies, he said that he remains bullish on the yellow metal, reiterating his call for prices to push to $1,700 an ounce. He added that gold remains an attractive asset in a world with bond yields falling further into negative territory in an environment of heightened global geopolitical uncertainty.

Gold is not just resilient against the U.S. dollar; it is also holding up despite record valuation in U.S. equity markets. April gold futures last traded at $1,584.50 an ounce, up 0.36% on the day.

(Bloomberg)



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

BLIS delivers substained profitable growth
Infratil - Full year results announcement for the year ended 31 March 2020
COMVITA LIMITED Announces NZ$50 Million Equity Raising to improve balance sheet flexibility and build resilience
GMT’s delivers statutory profit of $284.4 million before tax
U.S. Can Destroy Huawei, Part Two
Green Recovery Could Create 850,000 British Jobs, Report Finds
RBNZ Warns Banks’ Ability to Absorb Shocks ‘Is Not Unlimited’
Trustpower makes solid progress in challenging year
Air New Zealand liquidity and 2020 earnings update
THL begins New Zealand Restructuring process

IRG See IRG research reports