Gold Edges up Amid Pressure from US Fed Rate Hike & Sino-U.S Trade Tensions

Prospect of strong USD in long term owing to Fed rate hikes weigh down precious metals while Sino-U.S. trade wars is dampening US Crude market.
Colin First

Gold prices edged higher on Wednesday after the previous session’s sharp fall, but rising U.S. interest rates and lingering Sino-U.S. trade tensions continued to weigh on the market with investors selling the metal at small rallies.

Spot Gold XAUUSD is trading at 1203.59 up 0.20% on the day as of writing this article after hitting an intra-day high of $1205.89 while US Gold Futures Gccv1 is trading at $1210.20 an ounce down 0.34% on the day. Gol saw steep fall during American market hours on Tuesday as U.S. Treasuries rose after the United States and Mexico struck a trade deal. The selling (on Tuesday) shows nobody wants to chase the metal above $1,210 price handle. Investors and Analysts expect Fed interest rate hikes in September and December, and that is acting as a burden for gold.

Positive Outlook For Dollar in Long-Term Weighs Down Precious Metals

Gold has lost its appeal as a safe-haven asset, having fallen 7.5 percent this year, amid international trade disputes and the Turkish currency crisis, with investors increasingly turning to the dollar instead. The dollar was stuck in a tight range on Wednesday after touching a four-week low overnight as optimism over the U.S.-Mexico trade deal gave way to caution ahead of an upcoming deadline in the Sino-U.S. trade dispute.

The deadline for public comment on U.S. President Donald Trump’s increased tariffs on $200 billion of Chinese goods is on Sept. 5. As long as trade tensions between the United States and China continue to persist, the U.S. dollar will benefit and, in turn hurting precious metals momentum in the market. Spot silver XAGUSD is trading at $14.69 down 0.19% on the day.

Texas exploration and production companies and Chinese refiners shared a collective sigh of relief following a recent decision to remove U.S. crude oil from the list of goods entangled in the ongoing U.S.-China trade war. Nevertheless, though U.S. crude oil appears safe from tariffs, for now, China reportedly is still considering a 25 percent levy on imports of U.S. liquefied natural gas after officially imposing a 25 percent tariff on U.S. propane, butane, naphtha, jet fuel and coal imports.

The escalating trade disputes between the United States and China are putting the success of the American oil and gas sector at risk, and they stand to deter investment in long-term energy projects, amongst other negative implications, if tensions continue. Domestic oil and natural gas production continue to increase, but potential shifts in the global market as a result of international trade disputes could stall U.S. output. Spot Crude WTIUSD is trading at $69.08/b down 0.13% on the day.

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