By Barani Krishnan
Investing.com - Gold prices rose for a second straight day on Wednesday as the dollar’s plunge to almost three year lows sent more buyers in the way of the yellow metal, which acts as an inflation hedge and alternative to the greenback.
Gold is finishing 2020 on a fairly upbeat note, rising a total of 12% in four of the past five sessions, to climb from $1,870 lows. For the year, it is up 22%.
Daily gains in gold in the final week of the year have been modest, though, with the rise for both Tuesday and Wednesday amounting to just 0.7%.
In Wednesday’s trade, U.S. gold futures for February delivery on New York’s Comex settled the official trading session up $10.50, or 0.6%, at $1,893.40. In the prior session, February gold gained $2.50, or 0.1%.
The spot price of gold, which algorithms and hedge funds use to ultimately decide the direction in futures, was at $1,890.80, up $12.38 or 0.7%, by 1:53 PM ET (18:53 GMT).
The Dollar Index, pitted against a basket of six major currencies, slumped to April 2018 lows, trading below 89.52.
“USD weakness has been the driving force behind the broad gains being seen across precious metals markets,” said Joel Frank, a technical analyst for gold who blogs on FX Live.
‘“Most institutions are calling for a weaker dollar in 2021 as global growth, by the second half of the year, anyway, starts to see significant improvement as major economies approach herd immunity against Covid-19,” added Frank. “Though USD short positioning … is close (to) its highest levels in 2020, traders still seem keen to front-run some of this US dollar weakness going into the new year."