Gold Moves up from 7 Month Low But Risk for Decline Continues to Exist

XAUUSD was up 0.1% at $1,242.01 an ounce at 0103 GMT, after marking the lowest since Dec. 12 at $1,236.58 on Friday. U.S. gold futures for August delivery were 0.1% higher at $1,242.40 an ounce. The dollar traded below a 10-day peak hit in the previous session, versus a basket of six major currencies early on Monday. Despite this recovery in price action, Gold one month 25 delta risk reversals (XAU1MRR) fell to -0.475, the lowest level since March 21, indicating the demand for put options is strong.

A week ago, risk reversals were flashing positive at 0.10, meaning the implied volatility premium (or demand) for gold calls was higher than that of put options. The sentiment has taken a turn for the worse in the last seven days, the negative risk reversals indicate. This does not come as a surprise as the yellow metal fell to a 2018 low of $1,236 on Friday.

Safe haven precious metals are on recovery today due to news related volatility rather than fundamental support. With 12 Russians formally indicted in the still-ongoing Mueller investigation last Friday the Trump-Putin summit scheduled to occur today has caused global tension to reach new heights.  Silver remains relatively less affected by short-term noise maintaining its momentum from last week. The XAGUSD pair is at $15.80 with 0.09% decrease in value and is expected to continue moving within $15.40 to $16.10 price handle for the week.

Global supply prospects will remain at the forefront of the oil market in the coming week after prices posted sharp losses last week amid reduced bets on a global crude shortage. Oil prices traded near three-and-a-half-year highs close to $80 a barrel in late June and early July due to Libyan supply disruptions and fears the U.S. would press all buyers of Iranian oil to cut imports to zero starting from November when the U.S. re-imposes sanctions against Tehran. But prices have since weakened as OPEC member Libya reopened its ports in the east and U.S. Secretary of State Mike Pompeo said Washington would consider granting waivers to some of Iran’s crude buyers.

Meanwhile, Russia’s Energy Minister Alexander Novak has commented that the current level of oil prices stems particularly from the US trade war. Novak said Russia restored oil production by 80% in July against the reduction volume within the OPEC+ agreement. However, President Trump continues to blame OPEC for an increase in Crude Oil price. WTIUSD is currently trading at $70.53 per barrel.