Gold prices have surged past AU$3,628 (US$2,450) on the back of a weakening US Dollar (USD), illustrating a fundamental market shift that traditional investors should take note of. At Gold & Silver Standard, we believe that our gold-backed ERC20 token, Gold Standard (AUS), and our silver-backed token, Silver Standard (AGS), offer a unique and effective way to maintain and grow your wealth over time. In this article, we'll explore why relying on USD-based stablecoins might not be the best choice, and how gold and silver can provide a more stable and secure investment vehicle.
The Decline of the USD and Its Implications
The USD Index (DXY) has dropped to its lowest level since March, primarily due to robust housing data and a dovish stance from the Federal Reserve. The latest figures show a 3% increase in Housing Starts and a 3.4% rise in Building Permits for June, which have put downward pressure on the US Dollar. This decline is further exacerbated by the Federal Reserve's cautious approach, with market expectations leaning towards potential rate cuts in the near future.
Technical Indicators and Market Sentiment
The technical analysis indicates a bearish outlook for the USD. The double top formation, with its neckline at 104, has been broken, suggesting a potential decline to 102 or lower. This bearish sentiment is confirmed by the daily candle close below the neckline, reinforcing the expectation of further downside.
Conversely, the breakdown in the USD has had a positive impact on gold prices. Gold has surged past AU$3,628 (US$2,450) after breaking out of a double bottom formation. This upward momentum is expected to continue, with any price corrections seen as strong buying opportunities due to the ongoing weakness in the USD.
The Case for Gold and Silver Over USD-Based Stablecoins
While USD-based stablecoins offer the convenience of digital assets pegged to the value of the US Dollar, they inherently carry the risk associated with the USD's performance. As seen with the recent decline in the USD Index, relying solely on USD-based assets can expose investors to volatility and potential devaluation.
Gold and silver, on the other hand, have a long-standing reputation as safe-haven assets. They provide intrinsic value and have historically served as a hedge against inflation and currency devaluation. By investing in our gold-backed (AUS) and silver-backed (AGS) tokens, you gain the benefits of precious metals while leveraging the flexibility and security of blockchain technology.
Central Bank Buying Bolsters Gold and Silver
Despite the People's Bank of China (PBoC) pausing its gold purchases for the second consecutive month, other central banks around the world continue to hoard gold. For example, the Bank of India bought nine tons of gold in June, the National Bank of Poland added four tons, and the Czech National Bank acquired two tons. This ongoing demand from central banks supports the bullish outlook for gold, further enhancing its value as a reliable investment.
Technical Analysis: A Bullish Outlook for Gold
Gold prices have been on an upward trajectory for three consecutive days, indicating strong market sentiment. The formation of a double bottom suggests continued strength in gold prices, supported by the weakening USD. A break above AU$3,589 (US$2,425) is expected to lead to further gains, potentially reaching new all-time highs.
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