After a continuous bull run from 2022, gold prices have dipped more than 2% for the first time this month. The XAU/USD index has stagnated at the $4,500 level since May, providing no opportunity for a price spurt. While fears of a downturn are looming, Tom Winmill, portfolio manager at the Midas Discovery Fund, explained that the precious metal could soon bolster in value, all thanks to the weak US dollar and the growing de-dollarization trend among central banks.
“I really don’t see a lot of things that could be bearish for gold in the long term at this price level,” said Tom Winmill to Kitco News. “It could be a second wind here for gold,” he added. The analyst went on to explain that the DXY index, which tracks the performance of the US dollar, is struggling to climb above 100. It has remained at the 96-99 level for more than a year, which gives the precious metal leverage.
“With the weaponization of the dollar and the de-dollarization of global GDP, this trend could be in place for a while,” he said. “If the US dollar continues to lose reserve currency prestige, then the dollar gets weaker.” This will further boost the value of gold, with higher chances of surging double-digit again. “The next move is probably going to be lower real rates. And if that happens, hard assets look a lot better because there’s less opportunity cost,” he said.
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Gold Remains Steady, Investors Wait For the Next Peak
Central banks have shown interest in accumulating gold and diversifying their reserves. The US dollar is facing competition from gold and other local currencies to seal its spot. The growing de-dollarization trend is a cause for worry, as it could nip the DXY index. A weak US dollar would lead the way for other assets to take center stage.