Gold Rebounds Post Hitting 19-Month Lows on Weak USD

Gold pared heavy early losses that came in the midst of a broad commodity sell-off on Thursday, bouncing off of a 19-month low on short covering and a softer U.S. dollar following news that Beijing will hold trade talks with Washington this month. Spot gold XAUUSD was down 0.30% at $1,178.35 an ounce as of writing this article, after earlier falling as much as 1.2% to $1,159.96 in early Asian market hours, its lowest since January 2017. U.S. gold futures GCcv1 were down 0.42% at $1,185.50 an ounce.

Bullion has lost its appeal as a safe haven over the past few months as investors have preferred to park assets in U.S. Treasuries and dollar amid the uncertainty caused by the China-U.S. trade dispute. The dollar was nudged away from a 13-month peak on Thursday, as risk aversion eased and emerging market currencies recovered on news that a Chinese delegation will travel to the United States late in August for trade talks.

News of Sino-U.S Trade Talks Helped Precious Metals Cap Downside Move

From a technical perspective, the recovery from the 19-month low could be associated with oversold conditions shown by the relative strength index (RSI). Further, the daily candle now carries a long tail, which indicates bearish exhaustion. So, it seems safe to say the metal may have bottomed out for now. However, the put value, as represented by risk reversals, has jumped to one-month highs. For instance, the one-month 25 delta risk reversals (XAU1MRR) fell to -0.925 today –  the lowest level since July 20 – indicating the investors are expecting a further drop in gold prices and hence are likely buying put options. Spot silver also saw a decline in Asian market hours as USD saw positive influence following upbeat US macro data before news of Sino-U.S talks hit the market. XAGUSD hit new 13 months low at $14.328 and is currently trading at $14.650 an ounce up 1.48% on the day.

Crude oil futures edged higher during mid-morning trade in Asia Thursday amid mild profit taking after a build in US stocks triggered a more than $1.50/b fall overnight. Prices consolidated a bit this morning, likely due to some profit taking after the slump last night. Data released Wednesday by the Energy Information Administration showed US crude inventories rose 6.81 million barrels in the week ended August 10.

Analysts surveyed Monday by S&P Global Platts had been expecting a 1.7 million-barrel draw and the surprise build triggered a selloff. The impact of the US pulling out of the Iranian nuclear deal continues to play out, on the other hand, China’s decision to stop importing US Crude Oil has also affected the market. Spot Crude WITUSD is trading at $65.28/b up 0.23% on the day.