Gold Dips As USD Hits 13-Month High Amid Global Political Tensions

Colin First
Gold Friday
Gold Friday

Gold prices dipped in Asia on Friday, languishing near a one- year low, weighed down by a rally in the U.S. dollar amid heightened global political tensions. The strong dollar is affecting the price of gold. Despite heightened geopolitical tensions, gold bears are still in control of the price and pushing the bulls out of their boundary. The U.S. dollar, in which gold is priced, on Friday extended gains to hit a 13-month high against a basket of peers as European currencies such as the pound and euro continued to lose traction. Spot Gold XAUUSD is currently trading at $1208.42 down 0.32% on the day.  US Gold futures GCcv1 were down 0.5% at $1,213.4 an ounce. US Greenback denominated gold is currently on track to post its fifth weekly decline. Also adding pressure on gold were expectations for higher interest rates in the United States, where the Federal Reserve is expected to raise benchmark lending rates next month for the third time this year.

Stronger Dollar Pressures Precious Metals into Range Bound Momentum 

The U.S. economy is performing “very well” with continued growth clearing the way for one or two more interest rate hikes in 2018, Chicago Federal Reserve Bank President Charles Evans said on Thursday in an interview in which he dismissed earlier worries about weak inflation. U.S. rates tend to boost the dollar and Treasury yields, adding pressure on greenback-denominated, non-yielding bullion.  Given the strength of US Greenback, USD denominated precious metals are expected to trade range bound in both current and near future trading sessions. Silver saw steeper slide in spot market when compared to Gold as XAGUSD is currently trading at $15.319 down 0.80% on the day.

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Canadian oil producers are once again suffering from a steep discount for their oil, causing the largest spread between Canadian oil and WTI in years. Western Canada Select (WCS) recently fell below $40 per barrel, dropping to as low as $38 per barrel on Tuesday. That put it roughly $31 per barrel below WTI, the largest discount since 2013. Oil prices are trading near a seven-week low on fears the intensifying US-China trade tension will crimp global economic growth and increase financial vulnerability. The trade conflict overshadowed a decline in American crude inventories and potential supply losses from Iran. Meanwhile, some Iranian crude buyers have started looking elsewhere for supplies as renewed US sanctions aiming at curbing oil exports from the OPEC nation are set to take effect in November. There are still concerns over a possible decline in US oil sales to China as it could disrupt America’s supply balance by increasing its stockpiles and even end up creating a glut. As of writing this article, WTIUSD is trading at $67.14/b down 0.15% on the day.

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