This Morning in Metals: Gold price, US dollar retrace while Bitcoin surges

Gold price weakens

After surging to around $2,035 per ounce in August, the gold price for the most part trended in a band between $1,850-$1,950 through the balance of 2020.
Of late, however, the gold price has retraced, even falling below the $1,800 threshold.
Gold closed Thursday at $1,775 per ounce.
The gold price has fallen, even as the US dollar has also continued to lag. The US dollar index reached 90.23 today, compared with just over 99 a year ago.
One thing worth monitoring is growing interest in cryptocurrencies, particularly Bitcoin. The cryptocurrency has surged above the $53,000 mark and jumped by approximately 80% this year.
Amid a run of loose monetary policy from central banks around the world, some investors will look to other assets. That could mean they’ll even look to assets other than time-tested safe havens, like gold.
It’s unlikely that the US dollar will lose its status as the global reserve currency anytime soon. However, cryptocurrencies like Bitcoin could potentially weigh on gold, leading some investors to rethink traditional safe-haven asset strategy.
A lot can change in a year. In February 2020, Bitcoin hovered around just under $10,000.
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Fed releases Monetary Policy Report

Speaking of currency, the gold price and monetary policy, the Federal Reserve today released its latest Monetary Policy Report.
The report notes the labor market recovered as the year progressed. However, the pace of the recovery slowed down significantly late in 2020.

Benchmark interest rates, meanwhile, remain near zero.
“In light of the effects of the continuing public health crisis on the economy and the associated risks to the outlook, the FOMC has maintained the target range for the federal funds rate at 0 to ¼ percent since last March,” the Fed said in the report. “In pursuing the strategy outlined in its revised statement, the Committee noted that it expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.”

Texas tundra

A record-breaking run of cold weather in Texas has wreaked havoc on Texans’ lives, leading to power outages and even lack of water access or home heating.
“Last weekend, a major winter weather system characterized by extreme cold spread across much of the central United States, disrupting energy systems and causing serious health and safety issues, particularly in Texas,” the Energy Information Administration (EIA) reported. “At the same time that the cold weather increased energy demand, it also affected energy supply, causing intense and widespread energy market disruptions. Notably, electricity deliveries have been disrupted in the parts of Texas served by the Electric Reliability Council of Texas (ERCOT) as a result of various issues related to plant operations.”
Out of ERCOT’s energy mix, natural gas accounts for the largest share. That supply amounts to 40,000 MW of supply during peak periods, the EIA noted.
Freezing temperatures have impacted natural gas wells, the EIA reported, and pipeline compressors have lost power.
According to an EIA analysis last year, more than one-third of Texas households rely on natural gas as their primary heating fuel. Furthermore, Texas as a whole accounts for 15% of total US natural gas consumption.
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