Gold Trades Range Bound Near Weekly Highs Amid Bearish Rout in Global Equity Markets

Gold range bound near weekly highs as USD remains weak in broad market amid escalating Sino-US trade tensions and brexit woes.
Colin First
gold

Gold is trading in range bound fashion ahead of European market hours as spot gold saw a decline in early Asian hours but recovered losses and is trading flat as Asian equity markets took to bearish price action following a decline in Wall Street overnight inspired by a bearish rout in tech stocks. This rebound was further supported by subdued US dollar in the broad market which has been pressured by weak US macro data and a clouded interest rate outlook. The market is very quiet for precious metals today and appears to be in a holiday mood ahead of the U.S. Thanksgiving.

The dollar has come under some pressure giving some support to gold. Gold hasn’t received any boost despite weak USD in the broad market and rising tensions between US & China as both China & India two biggest markets for the yellow metal are seeing dovish investor sentiment combined with an exchange rate that has taken a hit due to crude oil price rally. As of writing this article, Spot Gold XAUUSD is trading flat at $1224.31 an ounce up by 0.02% on the day, while US gold futures GCcv1 are trading at $1224.50 an ounce down by 0.06% on the day.

Crude Oil Price Goes Down As US Crude Production Soars

The dollar index DXY which measures the greenback against a basket of six major currencies was trading near an over one-week low that it hit in the previous session. USD has been under pressure since trading session opened for the week as U.S. Federal Reserve officials cautioned on the global growth outlook and weak data at home, pointing to a potentially slower pace of rate hikes. While the market has priced in December rate hike investors now await forward guidance data to get an idea on pace for future rate hikes.

The current market situation is well in favor of precious metals as Dollar continues to struggle and treasury yields continue to decline ahead of year-end while precious metals have retained safe-haven demand and began seeing bids over Brexit and trade war woes. A weaker greenback makes dollar-denominated assets cheaper for holders of other currencies.  Spot Silver XAUUSD is currently trading at $14.39 an ounce down by 0.19% on the day.

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Oil markets lost steam on Tuesday, giving back earlier gains, as a deteriorating economic outlook and a surge in U.S. production outweighed expected supply cuts by the Organization of the Petroleum Exporting Countries (OPEC). Brent crude oil futures, the international benchmark for oil prices, were at $66.55 a barrel at 0313 GMT, down 0.4% from their last close, while U.S. West Texas Intermediate (WTI) crude futures were at $57.07 per barrel down 0.2% from their last settlement. While OPEC is considering cutting oil production again, the executive director of the International Energy Agency (IEA) Fatih Birol called on Monday for ‘common sense’ because fresh cuts could have negative effects on the oil market.

“Currently markets are very well supplied but we should not forget that spare capacity in Saudi Arabia is very thin, therefore cutting the production significantly today by key oil producers may have some negative implications for the markets and further tightening the markets,” Reuters quoted Birol as saying at a news conference in Bratislava. Spot US Crude WITUSD is currently trading at $56.77 per barrel down by 0.70% on the day.

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