19.01.202112:17 Forex Analysis & Reviews: Gold price movement will be mainly affected by the US dollar for a long period

Prices of precious metals increase on Tuesday morning due to the weakening of the US dollar. After rapidly moving up and reaching its maximum values over the past month, the dollar rapidly turned around and began to fall.

Gold futures for February delivery on the New York trading floor increased 0.46% or $8.35, to $1,838.25 per troy ounce. The support level is $1,803.6 per troy ounce, and resistance is $1,857.6 per troy ounce.

The price of silver futures contracts for delivery in March also went up by 1.56%, to $25.253 per troy ounce.

Copper futures for March delivery were up 0.19%, to $3.6205 per pound.

So far, the precious metals market does not have any serious external factors for pressure that would be able to significantly change the balance of power. In this regard, there is only dependence on the exchange rate of the US dollar, which has not been stable recently. Despite this, the dollar strengthened in the past and current weeks, but on Monday it has changed from a positive trend to a negative one and has fallen down. The USD index was lower in the morning, while earlier it reached its highest level for the month. The depreciation of the dollar immediately affected the value of precious metals. Gold prices began to rise as the cheaper dollar began to attract more investors who are holders of foreign currency.

Most analysts believe that the US dollar will remain almost the only driving factor for gold for quite a long period. Therefore, market participants should closely monitor the news to which the dollar reacts most and most rapidly. So far, the main pressure for the dollar in recent years is the political instability in the United States and the possibility of adopting a new, expanded package of financial incentives for the economy affected by the coronavirus pandemic.

The latter fact is literally key for the dollar and, accordingly, for gold. Recall that President-elect Joe Biden made a proposal to increase the financial assistance program to a total of $1.9 trillion. This plan was approved in the Senate, but the margin of votes was minimal, which means that there is very little chance of its final ratification. Meanwhile, such a large amount of incentives can seriously increase inflationary risks, and investors will be forced to save their assets with the help of more reliable sources, such as the "safe haven" of gold. Therefore, gold could add a good price and even cross the strategically important mark of $2,000 per troy ounce.