Gold Prices Correct As Dollar Gains Strength

Gold prices corrected yesterday and they were back to the levels that were seen last week as the risks and the global fears begin to recede slowly. We had mentioned a similar thing yesterday in our forecast when the prices were near the range highs. The reasons for the gold prices to fly high over the last few days were a combination of the political troubles of Trump along with unwinding of the dollar longs as the chances of a rate hike from the Fed in June gradually began to fade away. The incoming data from the US was also not as strong as expected and this led to the selling off of risky assets like stocks and the investment of these funds into safe assets like gold.

Gold Longs Unwind

But over the last couple of days, we have seen the political troubles in the US begin to calm down a bit, partly due to the fact that Trump was away on his foreign tours. We have also seen the market begin to price in the June rate hike once again as some of the Fed members are reportedly saying that it is still a distinct possibility and we are also seeing a situation where the market has begun to look away from the politics behind all these and begin to focus purely on the Fed and its actions. This has provide strength to the dollar over the last couple of days and has led to the stock markets rising and this is the reason why we are seeing the gold longs being sold and the gold prices correcting towards the 1250 mark. The market now awaits the FOMC minutes to see whether this optimism continues.

Oil prices continued to fly high yesterday as the prices shot through $51 during the course of the day and trades just below the $52 mark as of this writing as reports of a deeper cut in production and a longer one too, from OPEC, has helped to buoy up the oil prices. We also got the oil inventory data from the API, which is not an official release, and it showed a lesser than expected draw from the inventory. The official release is scheduled to come in later today and the market will be watching it closely though irrespective of this data, we do not expect the bull run to be reversed anytime soon.

Silver prices also corrected yesterday, though not as much as the gold prices and it came back down through $17 and is expected to be weak going forward as the focus shifts to the Fed.