The gold exchange rate is preparing for a dig up

In early September, the yellow metal fell to $1803 per troy ounce. After the first week, precious metal quotes strengthened at $1836. Consequently, in just five days, the yellow metal rose to its highest level since mid-June. The driving force behind the rise in the price of gold was an increase in demand for it in China and India, as well as among central banks.

India is the second largest yellow metal consuming country in the world. According to the World Gold Council, in August, the volume of precious metal imports to India almost doubled compared to 2020, reaching the highest level in five months. The country imported 121 tons of gold, due to high retail demand and increased production activity of jewelers. During the same period in 2020, imports amounted to 63 tons.

In addition, central banks from around the world replenished their gold reserves, buying 30.1 tons of precious metal in July 2021 after purchasing 63.1 tons a month earlier. In two months, Brazil has become a leader in this regard, increasing the national reserve by 41.8 tons. In the first half of 2021, central banks bought a total of more than 334 tons of gold, which is almost 2.5 times higher than the average number of purchases over 5 years and 29% higher than the average for 10 years over the indicated period.

Krishan Gopaul, an analyst at the World Gold Council, noted that the volume of acquisitions of yellow metal from central banks this year should exceed 2020.

Precious metal quotes held around a monthly maximum until September 6. On this day, the gold exchange rate fell by 0.1% to $1,824 per ounce. However, this level was still too high for the yellow metal. September 9, there was a correction to $1795. The reason: the strengthening of the US dollar, due to recent comments by Fed representatives about a possible reduction in the bond buying program.

Robert Kaplan, a representative of the US central bank in Dallas, said it was necessary for the regulator to announce at the September meeting a deadline for curtailing asset purchases. In his opinion, the process itself should begin in October of this year. His speech took place after the Fed's Beige Book was published, which dealt with the slowdown in US economic growth in July-August amid the spread of the delta strain of coronavirus. The financial report, which could provide significant support for gold, did not significantly affect its quotes.

A Fed meeting will soon take place, at which the situation may become clear regarding a reduction in the financial stimulus package and interest rates.

Michael Hewson, an analyst at CMC Markets (UK), said the dollar is now the main factor influencing gold quotes. However, a statement by Christina Lagarde, president of the European Central Bank, about the curtailment of the quantitative easing program could have a stronger impact on the yellow metal than an increase in the US currency index.

On September 14, gold quotes again overcame a psychologically important level of $1800. The precious metal exchange rate was set at $1808. Yellow metal prices rose slightly amid a weakening dollar and falling US government bond yields. The decline in profitability of the main competitors of gold was facilitated by inflation data in the United States. Its growth was unexpectedly weak, raising doubts among investors about the Fed's willingness to cut its quantitative easing program in the near future. The US Department of Labor reported that the consumer price index (excluding food and energy) rose 0.1% in August, which was below expectations (0.3%). This is the smallest increase in inflation since February of this year.

Ed Moya, a senior analyst at brokerage OANDA (USA), said the statistics would favorably affect gold because the Fed's announcement of a reduction in quantitative easing at a meeting in September was unlikely to take place. The yellow metal is currently in a narrow range and is likely to continue consolidation until the Federal Open Markets Committee meets. The next meeting of this Fed committee is scheduled for September 21-22.

Currently, gold has taken a waiting position, being within a long period of consolidation. If the precious metal exchange rate rises above $1917, then the upward trend of 2015-2020 will resume. A drop in quotes below $1610 will mean an approach to the long-term bear market.

The forecast for the yellow metal remains positive. According to the latest data from the Manufacturing Business Activity Index, growth is slowing globally, and the US unemployment rate has still not reached the desired level for the Fed. Therefore, for precious metal, this autumn may become quite favorable, and now it accumulates forces for a jerk up.