or now, the skyrocketing US debt and escalating US-China tensions sent the US dollar to a 22-month low.
The EURUSD extended gains to 1.1781 and the GBPUSD traded past the 1.29 mark for the first time in almost five months. The surge in both pairs is mostly driven by a broadly weaker US dollar. But the overbought market conditions hint that a downside correction is healthy at the current levels.
Gold advanced to $1980 per oz on Monday. The soft US dollar, low-to-negative US real yields, rising inflationary pressures, possibility of a global stagflation and the slippery market conditions remain supportive of a strong gold in the medium, long run. However, the rapid surge in gold prices also increases the risk of swift profit taking and a sharp downside correction. Gold rallied more than $500 per oz, 34%, since March. There is room for a decent retracement.
Gold miners, on the other hand, continue rising parallel to gold prices. Fresnillo’s share price has almost tripled since March, as Anglo American’s almost doubled. Any significant correction in the precious metal should also trigger a decent retrace in these stocks.
Oil remains steady near the $41 per barrel. Prospects of a slower recovery in oil demand amid heavily interrupted supply chains and persistent rise in new Covid cases, combined with a perhaps premature waning of the OPEC production cuts will likely limit the appetite near the actual levels. Strong resistance is eyed into $43.50 per barrel, the 200-day moving average.
