EGU Monthly Report | Short-term strength in U.S. dollar triggers gold plunge

1) Review of EGU Price Change

According to the statistics for the past 30 days, EGU prices have risen by less than 1% for four days. Over 18 days, the price increased between 1% to 2%. For the remaining days, the price increased between 2% to 3%. These statistics show that if the user trades on our platform with a fixed amount of 2,000 EGU each time, the capital will be approximately USD 1,308 and the accumulated profit will amount to USD 628 in a month. The user will thus be able to achieve an ideal return on investment of 48%. Therefore, seizing more trading opportunities will allow a higher return on investment.

2) Review of Market News

Recently, the market’s risk aversion has soared and prompted investors to sell and cash out their safe-haven assets to hedge against downside risks. This prompt resulted in the rise of the U.S. dollar and the fall in the gold price. At present, there might be several reasons contributing to the change in the gold price:

I. Second wave of coronavirus infections in Europe
As the coronavirus infection rate is on the rise across Europe, experts are concerned that another significant outbreak might be around the corner. As a result, the European stocks fell, the U.S. Dollar Index surged, and the gold price fell by nearly USD 100, by far the sharpest drop in the second half of the year.

II. U.S. Stimulus package vote on-hold
As the Federal Reserve has yet to launch any new economic stimulus policies, this brought about a short-term market disturbance and prompted a decline in the gold price.

III. Central bank’s declining demand for gold
According to the data from the World Gold Council, the central bank’s gold demand has been slowly declining in the past two years, and the net purchases of the central bank in July 2020 fell to the lowest level since December 2018. This slowing of demand served as resistance to the upward trend of gold prices.

However, according to a report published by Citigroup Inc. on 24 September 2020, the gold price could potentially rise above USD 2,000/ounce and hit a new high before the end of the year. Several factors contributing to this rise might be due to the spread of the global epidemic and the upcoming U.S. presidential election.

Although it may seem that gold has lost its sheen due to the short-term strengthening of the U.S. dollar, analysts believe that gold price will remain positive in the long run.

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