The price of gold has been falling sharply since the beginning of the week in parallel with the single currency. Fears of further drastic measures to stem the second wave of coronavirus outbreaks facing Europe have caused the dollar to soar since the beginning of the week, putting pressure on precious metal and major currency prices.
Forex traders’ fears have risen a notch after Madrid decided to reconfine certain districts and Boris Johnson announced the closure of bars, pubs and restaurants in the evenings at 22:00 starting Thursday. Investors fear that these measures will become widespread in European countries, which would be disastrous for the economic recovery.
Although fundamentals remain in favour of gold in the long term, notably thanks to negative real rates, its short-term evolution will depend mainly on the dollar’s performance and therefore on the reaction of governments to the resurgence of coronavirus in Europe.
Source DailyFx
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