The current price of gold this week is up and down in a volatile environment impacted by rising global COVID-19 cases, the lack of a stimulus bill before the election, and more. The spot gold price closed on October 9th around $1938, and it declined at the open on October 11. Then, it plummeted on October 13th and rose past $1920 the following day. Today, the current price of gold began just above $1900, but it slipped overnight to a low of $1897.
What Impacts the Current Price of Gold?
Gold dipped below $1900 on October 13, a psychologically important level for investors. However, technical resistance levels for gold around $1915 on the bearish position and $1943 on the bullish position. The factors weighing most heavily on the current price of gold are the lack of US stimulus, the impending election, falling US dollar strength, unemployment, and the escalating economic tensions with China.
What is the Relationship with PPI, The Dollar, and Gold?
The spot gold price gained on Wednesday, sending Tuesday’s plunge seemingly into reverse. Reports concerning the weakness of the US dollar on Wednesday showed that the better-than-expected information for the US Producer Price Index (PPI) number had little effect on the USD, at first. Last month, the PPI increased by 0.4%. This is significant because PPI is a tool that is helpful for objectively sniffing out inflation.
PPI is the average cost for the production of goods. This number covers about 10,000 individual products and product groups from US companies. Most production takes place overseas in China, so PPI relates to the dollar through the third party Yen because China often uses it. As producers have to deal with input inflation, rising costs move onto retailers, then consumers. Therefore, when using the Consumer Price Index and PPI, you can determine if the price increase is a result from inflation or something else.
If CPI and PPI increase side by side, inflation is a factor. If they do not increase in tandem, then there may be other causes underlying why a retail price grew. Interestingly, PPI was up Wednesday, but the dollar traded lower.
Source: Market Watch
Therefore, something else bolsters PPI, perhaps it is consumer demand. As a result, the current price of gold was up on Wednesday. However, the bad news seems to outweigh the good as we move through the week.
Current Price of Gold, Unemployment, The Stimulus Bill
Unemployment and COVID-19 effectively scarred the global economy. While unemployment numbers have mostly stabilized, they are by no means significantly down. 898,000 more Americans applied for unemployment last week. This is the highest level since mid-August, but current claims fell from the high of 1.167 million total to just over 10 million.
According to CNBC, “The unemployment rate has come down to 7.9% but is still more than double its pre-pandemic level.” This clearly captures the fact that there is recovery, but that recovery is slow and is challenged by day-to-day news. Therefore, the current price of gold slowly rises today as a result.
Additionally, reinstated lockdowns in major European cities go to show that COVID-19 still has the economy in a chokehold. Europe resumes talks about more fiscal stimulus, which may mean a boost for gold despite the US tabling the stimulus bill before the election.
The stimulus package first released to Americans in April included the promise of a second stimulus check. However, the US is yet to see solid developments from this dangling promise. Now that the election is less than three weeks away, the focus of the President is on campaigning after reportedly recovering from COVID-19. Consequently, Americans are discouraged and believe there will be no stimulus check before the election. The current price of gold today started lower as a result of this news, but it is steadily on the mend. The spot gold price balances around $1900 this week.
China’s Potential Influence on the Current Price of Gold
An interesting development for investors to keep an eye on is reports regarding China. It appears that China is seeking to “punish” other countries by barring access to precious metals and rare earth minerals. This drafted legislation is set to be reviewed by the National People’s Congress and potentially implemented in the new year. This has the potential to seriously impact the spot price of gold and investors in addition to western manufacturers.
China mainly limits access to precious metals right now through export quotas and selling primarily to companies that manufacture in China. Although China already has been restricting access, this new legislation can make these metals much harder to attain. As a result, the spot gold price could become much more expensive. While the current price of gold has yet to react to this news, China’s influence has serious implications about where the spot gold price may be headed in 2021 and beyond.
Jesse Felder, the publisher of the Felder Report newsletter, remains bullish on gold. While the current price of gold is almost double its price from the last five years, he believes it is still cheap in comparison to equities.
“The gold price relative to the Dow Jones Industrial Average would seem to suggest it is not expensive at all. In fact, to match the valuation peak it reached about a decade ago, gold would need to double again from its current price.”
Gold analysts all seem to suggest that the spot price of gold has further room to grow. So, don’t let the current price of gold discourage the value of your safe haven portfolio. Look to the long-term and consider what you think your best moves areas 2021 moves ever closer.
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