Gold price in euros to new record

The depreciation of the euro is driving the Gold price in this currency to record highs. On Friday afternoon, the price rose to more than €46,800 per kilo and €1,457 per troy ounce. Gold has been in an upward trend for some time, but is getting an extra boost from the exchange rate effect. At the time of writing, the gold price in dollars is hovering around $1,575 per troy ounce. That is lower than the level of the beginning of this year, when a confrontation between the US and Iran sent the gold price soaring to $1,610.

Gold continues to benefit from a flight to safe havens and persistently low interest rates. In January, the World Gold Council an inflow of 61 tonnes of gold in so-called Exchange Traded Funds (ETFs). At the end of last year, stocks of these investment vehicles had already risen to a record level of almost 2,900 tonnes, thanks in part to increased interest in European gold ETFs.

Gold price in euros to record high

Gold price higher, euro under pressure

The euro fell this week to $1.08, the lowest level against the dollar in two years. The currency is under pressure due to extremely low interest rates, which traders take advantage of by borrowing money in euros and investing it in another currency. This Carry Trade ensures a greater supply, which further depresses the exchange rate. As the chart below shows, the euro has been in a downward trend since the beginning of 2018, when the exchange rate was still at $1.25.

The euro is also suffering from the effects of the coronavirus. Europe is an important trading partner of China and also produces many goods for the Chinese market. This trade is currently hampered by all measures to prevent the spread of the virus. For example, there are fewer planes, ships and trains to and from China. If this situation persists for a longer period of time, it could also have a detrimental effect on the European economy. Investors therefore prefer dollars as a safe haven, as the US economy seems to be less affected by the economic fallout from the virus.

Euro to lowest level against the dollar since 2017 (Source: Tradingview)

This contribution was made from Geotrendlines