US Dollar Comes Softer as Precious Metals Hit Fresh Highs

The foreign exchange markets opened today, Monday, October 4, with a weaker US dollar. This development comes as the official currency of the United States offset wagers that the US Federal Reserve System could start tapering its COVID-19 pandemic-era asset purchases soon.

We want to share this latest foreign exchange report with our readers. We believe reading this news will help them understand the present performance of the US dollar in the foreign exchange markets and know how they can carry out their trading activities this week.

Based on the news posted online by investments, business, and markets news outlet The Edge Markets, the US dollar index plummeted to its lowest since Wednesday, September 29. This event has made gold more affordable for buyers holding other currencies.

Patrick Harker is the president of the Federal Reserve Bank of Philadelphia. He cited that the US Federal Reserve System may be near meeting the inflation mandate set for raising interest rates.

However, Harker pointed out that it might be a year or longer before the US central bank’s employment target gets met to permit for an actual rate increase. Last Friday, October 1, Loretta Mester remarked that the Fed’s conditions for raising interest rates could get fulfilled by the end of next year.

The Federal Reserve Bank of Cleveland’s president added that she anticipates inflation to return down to the central bank’s goal in 2022. Meanwhile, as the US dollar comes softer, precious metals’ value surged.

Among these rare metals is gold which is traditionally considered an inflation hedge, though diminished central bank stimulus and interest rate hikes tend to push government bond yields northwards.

This event, in turn, translates into a higher opportunity cost for gold which pays zero interest. Gold hit a near two-week high on a softer US dollar.

Spot gold surged 0.2 percent to US$1,764.60 per ounce as this trading week began. It previously hit US$1,765.54, which is its highest since September 23.

Additionally, US gold futures gained 0.4 percent to US$1,764.90. SPDR Gold Trust GLD is the world’s largest gold-backed exchange-traded fund or ETF. It cited that last Friday, its holdings slipped 0.4 percent to 986.54 tons.

Last week, demand for physical gold also picked up in top consumer China. Plus, forex analysts recorded increased activity in other Asian centers like Singapore. Besides gold that reached its two-week peak today, other precious metals’ value increased, such as silver, which was up 0.4 percent at US$22.62 per ounce.

Palladium edged 0.1 percent up to US$1,921.72, while platinum rose 0.4 percent to US$976.08. The US dollar may be weak at this point, per this report by The Edge Markets.

Also, the US dollar’s rate may not be what traders expect it to be. Therefore, we recommend our readers defer exchanging their units of the official currency of the United States for now if possible.

They should wait a little bit and see how things will change throughout this week. When they view that the official currency of the United States’ rate is favorable for them, then that time is when they should engage in their trading to get the most of the US dollar units they are holding.

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