Gold Rebounds Post Testing Near 2018 Lows but Dovish Market Sentiment Remains Prevalent in Market

In early Asian market hours today, spot gold moved very near to 2018 low’s with XAUUSD reaching $1215.50 and is currently trading at $1219.99 up 0.33% in the day when compared to Wednesday’s closing price but still new 2018 lows.

Spot Gold hit 2018 low on July 19 at $1211.08 as the dollar firmed after speech from Federal Reserve Chairman Jerome Powell when he mentioned that U.S. economic outlook reinforced views that the central bank is on track to steadily hike interest rates. As the outlook for US Greenback remained positive since then, the gold market is currently trapped in a tight range between $1235.22 and $1211.08. Tighter monetary policy dents the appeal of non-interest yielding bullion, leaving investors to rely on a rise in the intrinsic value of the asset.

Gold Takes a Steep Fall As Demand For USD Spikes Up

Global demand for gold fell 6 percent in the first half of this year due mainly to a sharp decline in purchases by exchange-traded funds (ETFs), the World Gold Council said in a report on Thursday. Total global demand for gold was 1,959.9 tonnes over January-June, down from 2,086.5 tonnes in the same period last year and the lowest first-half total since 2009, the industry-funded WGC said in its latest Gold Demand Trends report. Silver demand in the global market is also in a steep decline as US Greenback continues to attract more investors each day owing to strong economic outlook and hawkish support from the central bank. Spot silver XAGUSD continues to remain trapped in consolidating price range but is up 0.21% in the day at $15.425 as of writing this article.

Crude prices dropped more than $1/b Wednesday after the US Energy Information Administration reported a build in US crude inventories. US crude stocks rose 3.8 million barrels in the week ended July 27, the EIA report showed. US crude exports fell 1.37 million b/d to 1.31 million b/d in the week, the data showed.

The only bright spot for the market was a decline in US crude production US crude production fell 100,000 b/d in the week ended July 27, the EIA data showed. Elsewhere, OPEC producers Iraq and Kuwait were seen ramping up production in line with OPEC’ decision to increase output from the second half of 2018. Iraq’s exports rose to a record high 3.54 million b/d in July, data from the oil ministry showed Wednesday, while Kuwait’s’ crude production rose 90,000 b/d month on month to 2.8 million b/d in July, the country’s oil minister Bakheet al-Rashidi said Wednesday. Kuwait’s’ July output was the highest since December 2016. While the overall picture for crude remains positive, prices are dominated more by supply-side narratives and as of writing this article WTIUSD is trading at $68.46/b down 0.38% when compared to Wednesday’s closing price.