Gold price drops on U.S dollar index recovery after three year low

By Remilekun Davies & Ademola badmus

Gold slipped as the U.S. dollar index, which measures the currency’s strength against a trade-weighted basket of six major currencies, rose up off a three-year low on Friday ahead of U.S cash equity market open.

A number of factors including firming inflation and a fall in retail sales and industrial production hit the dollar. There seems to be an inverse relationship between gold and dollar when the U.S dollar is trading down, gold tends to rise in value and vice verse.

The U.S. dollar index rebounded after it dropped to a three-year low since December 2014 following earlier data from the U.S.

The rise in U.S dollar Index overnight is slightly pressuring the yellow metal. The Dollar index rose 0.46 percent to89 from the opening of 88.59.

Both the Euro and the Japanese Yen have traded lower on the day. With the US markets closed on Monday for a federal holiday; expect liquidity conditions to remain muted until at least Tuesday, February 20.

While silver has practically been given up for dead by the market recently, as the gold/ silver ratio is above 80:1. The last time this ratio was this level was January 2016; gold stocks began a huge 180 percent move in just six months, while silver miners outperformed gold.

Elsewhere, Oil prices stood a near one week high on Friday as global equities headed for their biggest weekly. According to a senior economist at Mitsubishi UFJ Research and Consulting in Tokyo, Tomomichi Akuta, “Oil is getting support from a rebound in global stock markets and a weak dollar, but the upside is limited due to a projection for rising U.S. production”