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The relative weakness of the Dollar has caused a divergence in the way metal prices are moving over the past few weeks in both USD and GBP. This has led to many market analysts predicting that gold’s trajectory in USD and GBP could be further intensified by a weakening USD. According to a recent Reuters article, these predictions come with a lot of support from the USD (DXY index) hovering around its lowest value for the past 15 months.
In the absence of other events, if the British Pound were to weaken against US Dollars, the gold price in GBP would likely rise. Whereas, if the British Pound were to strengthen against the Dollar, the gold price in GBP would likely fall.
The next milestone of influence in this divergence, comes in the form of a U.S. interest rates review due on July 27th. Prior to this date, many investors will be keeping a close eye on various economic indicators, as well as any comments from Federal Reserve System officials that could indicate a change in U.S. interest rates.
Since commodities such as gold and silver are normally bought and sold in USD on the international market, the current weakness of the currency makes them more attractive and affordable to those living outside of the United States. Subsequently, it could be possible to identify an influx in buying activity within larger gold markets such as China and India.
In conclusion, the price of precious metals (gold and silver) is now more attractive and affordable overall for UK investors compared to their U.S. counterparts, whilst those U.S. investors are likely to see gains in their precious metal investments.