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Gold Capped Above Six Month Lows As Trade War Remains in Focus

By:
Colin First
Updated: Jun 25, 2018, 08:56 UTC

Gold prices edged lower on Monday, pressured by a strong U.S. dollar amid prospects of higher interest rates, while global trade tensions kept the metal buoyed above a six-month low hit last week.

Gold

Spot gold was 0.1% lower at $1,267.23 an ounce as of 0432 GMT while U.S. gold future was down 0.2% at $1,268.80 per ounce. Dollar-denominated gold is greatly influenced by greenback’s movement regardless of market sentiments and is viewed as less of a safe-haven demand into gold but rather a reaction to USD strength. There are specific factors that will actually push the dollar higher, given the trade tensions as well as the booming U.S. economy versus other economies. Gold usually gains from political and economic tensions but has struggled this time around as the dollar has risen strongly, making the dollar-priced metal costlier for non-U.S. investors. The overhang of higher U.S. interest rates and dollar continues to hold relatively firm as dealers sell on rally. The dollar needs to see significant downwards movement for XAUUSD to see breach resistance at $1285 handle.


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Gold Still Under Pressure

Silver had a flat opening for the week similar to yellow metal. Dollar-denominated metals are always harder to hold for investors when the greenback is strong as there is no interest gained during the time particular metal is held and it is also costlier hence making the instruments less attractive. While the price for XAGUSD has gone down when compared to Friday, it remains in the 7-day average price range at $16.30 to $16.40 price levels and is currently trading at $16.34 in the spot market.

Gold Hourly
Gold Hourly

Oil prices were supported after OPEC and non-OPEC producers agreed on a modest increase in production from next month, without announcing a clear target for the output increase, leaving traders guessing how much more will actually be pumped. Non-OPEC said in their statement that they would raise supply by returning to 100 percent compliance with previously agreed output cuts, after months of underproduction. Oil had rallied on Friday after OPEC agreed to an unexpectedly modest increase in production from next month after Saudi Arabia persuaded Iran to cooperate. There aren’t many countries that can raise outputs, with only Saudi Arabia having the capacity to flexibly increase the output. But if Saudis alone increase outputs sharply, they could face backlash from some other countries. The next focus will be on the size of output increase by Saudis in July. WTIUSD is currently trading around $68.53 with pair opening on slight downtrend gap. Moving forward investors are also looking for results of Crude Oil Inventories data from US markets later this week.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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