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Gold Sinks on Increased Demand for Risky Assets

By:
James Hyerczyk
Updated: Aug 15, 2017, 05:30 UTC

Gold futures lost ground on Monday but remained close to its two-month high. The precious metal was pressured by a strengthening U.S. Dollar and increased

Gold Investors Reduce Exposure

Gold futures lost ground on Monday but remained close to its two-month high. The precious metal was pressured by a strengthening U.S. Dollar and increased demand for higher-risk assets. The risk-on session was fueled by a slight easing of tensions between the United States and North Korea.

Gold
Daily December Comex Gold

Worries began to ease over the week-end after Secretary of State Rex Tillerson and U.S. Secretary of Defense James Mattis published a commentary piece in The Wall Street Journal stating that the current U.S. administration would continue to pursue diplomatic resolutions with North Korea. They said, “The U.S. has no interest in regime change or accelerated reunification of Korea.”

Investors returned to higher yielding assets on Monday on rumors of a Russia-China plan to diffuse the escalating conflict between the United States and North Korea. The two countries are hoping to get North Korea to stop its missile testing while asking South Korea and the U.S. to scale back its military exercises.

E-mini S&P 500 Index
Daily September E-mini S&P 500 Index

U.S. Equity Markets

U.S. equity markets posted their best performance of the summer as investors reacted to a possible peaceful settle of the escalating conflict between North Korea and the U.S. The NASDAQ Composite posted a gain of 1.32%. The blue chip Dow Jones Industrial Average was up 0.62% and the benchmark S&P 500 gained 1.00%. The move in the S&P 500 Index was its biggest gain since April 24, when it rose 1.08 percent.

The rally was primarily fueled by money from safe haven assets like gold and the Japanese Yen which sold-off sharply after posting strong gains last week.

Crude Oil
Daily October West Texas Intermediate Crude Oil

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil fell more than 2 percent on Monday as a strengthening U.S. Dollar led to a drop in demand for the dollar-denominated commodity. Weak domestic demand data from China also weighed on prices. Losses were limited, however, on reports of potential reductions in crude oil supply from Libya.

Trading turned volatile during the session after the National Bureau of Statistics (NBS) data showed Chinese refineries processed 10.71 million barrels per day (bpd) in July. This figure was down around 500,000 bpd from June and the lowest rate since September 2016.

In other news, Libya’s National Oil Corporation (NOC) said an investigation had been opened into recent security violations at Sharara oil field.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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