Gold Gains on Increase in Short Term Bet Volume amid Trade War Fears

Precious metals were on a steady downtrend over the last few sessions as trade war came back into focus which resulted in USD gaining strength in the broad market. While the US has been waging trade war on multiple fronts, the one carrying most impact in the current market is Sino-U.S trade war.

The US has already implemented tariff on goods worth $50 billion from China, US President Trump has announced that he will soon add tariff’s to additional $200 billion worth of Chinese goods which has resulted in equity and forex markets across globe taking a bearish stance while investors move their funds to USD as US Greenback has recently gained the tag of safe haven instrument which resulted in traditional safe haven instruments like Gold and Silver losing heavily in broad market. Especially US Dollar denominated gold and silver seeing heavy losses this year. Spot Gold XAUUSD has already lost over 10% this year alone.

Uncertainties From Emerging Market Currency Crisis To Keep Gold Up in Short Term

As of writing this article, Spot gold XAUUSD is trading at $1194.59 up 0.25% on the day as the instrument is seeing an increase in short-term bids post the pair hitting new 2018 low at $1189.59 earlier this week. Meanwhile, U.S. Gold Futures GCcv1 is trading at $1200.30 up 0.10% on the day.

Gold is holding up at these levels well as there are some uncertainties stemming from emerging market currency crisis. When the currency weakens, inflation shoots up and gold has historically performed well during those times as gold is seen as a safe haven against rising prices in times of inflation. Meanwhile, Spot Silver XAGUSD is trading at $14.15 an ounce down 0.14% on the day.

Crude oil futures were lower during mid-morning trade in Asia Wednesday as production loss from Tropical Storm Gordon in the Gulf of Mexico was increasingly seen to be limited. Oil markets orchestrated an upswing, with Brent testing May levels after Tropical Storm Gordon hit the Gulf of Mexico, but prices pulled back considerably as the magnitude of the storm suggests production losses will be limited.

Meanwhile, Saudi Arabia’s offshore oil expansion plans have taken a step forward with the awarding of a contract to Baker Hughes to start drilling works in September at Marjan in the Persian Gulf. The project aims to raise Marjan’s production capacity by 300,000 b/d. It is the first of three major offshore expansions that include the 800,000 b/d Zuluf and 200,000 b/d Berri fields. Adding another  1 million b/d of capacity by 2023 from the three offshore fields will help offset reduced output from older assets. Spot Crude WTIUSD is trading at $69.19/b down 0.90% on the day.