Gold Continues to Lose Luster despite Trade War Fears

Gold Spot market fell from its 2018 high hit in early April 2018 at $1369.10 and the same is true for US Gold future contract as well. US dollar-denominated gold has lost over $1000 since downtrend began in later half of April. While US Greenback continues to weaken over Trade war concerns losing ground against major global currencies, precious metals have failed to capitalize on the loss of momentum. Investors continue to approach Safe haven currencies rather than precious metals as they offer better interest yields. This situation has been inspired by an extremely positive macro data outcome signifying positive economic growth in US market.

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Gold Continues Fall

This positive market growth has caused US central bank to increase its interest rate and key monetary policy members have commented on multiple rate hikes to come later this year on various US Fed policy Meet sessions. This comment has caused US Treasury bond yields to reach new multiyear high’s making them a better choice of investment than Precious metals which offer no interest on investment thus making it a costly option as US Dollar may continue to grow strong in long-term supported by Fed rate hikes. XAUUSD is currently trading at $1265.40 in the spot market, while US Gold futures for August delivery are down 0.2% during Asian market hours.

XAGUSD (Silver) is trading flat at $16.30 handle during Asian market hours and is expected to move range bound across the weak. This range-bound momentum in silver is influenced by market sentiment that remains same for all USD denominated precious metals. With no option to gain interest on investment and prospect of US Dollar growing strong in long-term supported by Fed rate hikes, investing in silver is costly for investors and hence the dovish sentiment is expected to remain strong as there is lack of trigger to support silver’s uptrend movement.

After reaching their highest level in about three years earlier this month, the price spread between global benchmark Brent crude and U.S. benchmark West Texas Intermediate crude has narrowed in recent days on the back of a production outage in Canada and OPEC’s plans to raise output. On Monday, August WTI crude fell by 50 cents, or 0.7%, to settle at $68.08 a barrel on the New York Mercantile Exchange. August Brent suffered from a larger drop, down 82 cents, or 1.1%, to end at $74.73 a barrel on ICE Futures Europe.

WTI crude was trading at $68.29 on Tuesday, while Brent was at $74.79. This narrowing of discount between Brent Crude and WTI which is currently at $7-a-barrel as opposed to $11 a barrel—the widest since roughly mid-2015 which existed earlier this month is expected narrow even further in coming days. While Brent Crude fell over expected increase in output from Saudi and Syncrude outage in Canada expected to continue even in July, WTIUSD price action will be influenced by expectations that U.S. output growth is slowing with pipeline constraints.