Commodity Market: Gold rises to almost 9-year highs due to broadly weaker dollar, prospects of new stimulus

With the US Dollar struggling near 19-week lows, Gold advanced for a fourth straight trading day on Wednesday, touching highs last seen in September 2011.

“Gold is deriving strength from a broadly weaker dollar despite the improving market mood,” FXTM analyst Lukman Otunuga said.

“The fundamental themes weighing on global sentiment remain intact, with rising coronavirus cases in the largest economy in the world fostering a sense of unease.”

The latest data by the Center for Systems Science and Engineering at Johns Hopkins University showed total confirmed COVID-19 cases had already surpassed 14.959 million worldwide, with US cases now exceeding 3.902 million. Global death toll has surpassed 616,000.

According to UBS analyst Giovanni Staunovo, the precious metal is also drawing support from discussions over new fiscal stimulus. On Tuesday Republicans and Democrats did not manage to reach consensus on the next round of coronavirus relief measures, with the current stimulus bill ending this month.

Widespread stimulus measures tend to support Gold, as the yellow metal is largely considered as a hedge against inflation and currency debasement.

As of 9:36 GMT on Wednesday Spot Gold was gaining 0.61% to trade at $1,852.89 per troy ounce, after earlier touching an intraday high of $1,865.84, or a price level not seen since September 9th 2011 ($1,886.27). The precious metal has risen 2.13% so far this week, following six consecutive weeks of gains.

Meanwhile, Gold futures for delivery in August were edging up 0.44% on the day to trade at $1,852.10 per troy ounce, while Silver futures for delivery in September were up 2.80% to trade at $22.160 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging up 0.11% on Wednesday to 95.26, hovering just above fresh 19-week lows.

Today Gold traders will be paying attention to the monthly report on US existing home sales at 14:00 GMT. Sales of previously owned houses probably rebounded 24.7% to a seasonally adjusted annual level of 4.80 million units in June, according to market expectations.

Meanwhile, near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of July 22nd, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on July 28th-29th, or unchanged compared to July 21st.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,833.67
R1 – $1,851.48
R2 – $1,861.29
R3 – $1,879.11
R4 – $1,896.92

S1 – $1,823.86
S2 – $1,806.04
S3 – $1,796.23
S4 – $1,786.43