After plunging on Friday, gold prices have rebounded for a second day on Tuesday as the US dollar was a touch weaker ahead of the U.S. presidential election.
Finally, we have a break to the upside in both gold and silver, something that many precious metals investors have been patiently waiting for, but expected to happen.
As the price of the yellow metal punched through the $1625 an ounce level, buy stops were initiated, fuelling the rally as some traders on the short side were forced out of the market.
Gold’s value does not arise from its usefulness in industrial or consumable applications. It arises from its use and worldwide acceptance as a store of value. Gold is money.
Even though the European Central Bank and the US Federal Reserve failed to deliver any new stimulus programmes last week, the price of gold has managed to remain above $1600 an ounce.
Much of the selling pressure in the gold market can be attributed to the current strong US dollar which I believe is a total aberration. Since May this year, the greenback has gained more than 6% against a basket of major currencies despite a slew of poor economic data.
Thanks to all the media hype about the Greek elections, many people around the world were beguiled into believing that this small country had the power to decide the fate of the euro itself as well as the financial state of the entire world.