Increased Risk Appetite & Greenback’s Rebound Put A Dent On Precious Metal Price Action

Gold slides down from weekly high’s but managed to retain bullish price action on weak US Greenback despite rebound.
Colin First
Gold Tuesday
Gold Tuesday

Precious metals are trading relatively subdued today on broad based prevalent US dollar. As gold neared weekly high’s yesterday on back on weak US Greenback, profit booking activity and increased risk appetite amid investor optimism on positive outcome for Sino-U.S. trade deal in broad market saw gold fall significantly. Another factor that led to gold’s decline was dollar’s rebound from 2½ month low hit in previous session. The recovery in dollar didn’t amount to much preventing yellow metal’s decline. While market saw positive price action investors turned cautious in Asian market hours with major Asian indices turning red on news of North Korean leader Kim Jon Un’s visit to China while US delegates were present especially after New Year news which saw Kim state that he will consider alternative options if US sanctions on North Korea are not eased.

Risk Appetite Increased On Sino-U.S. Trade Talk Optimism

This event spurred a little for safe haven assets but the momentum was short lived as European markets traded relatively positive despite political and economic woes affecting price action in market. As of writing this article, Spot Gold XAUUSD is trading at $1283.72 per ounce down by 0.41% on the day while U.S. Gold futures GCcv1 were trading at $1284.80 per ounce down by 0.39% on the day. The demand for gold and other safe haven assets are expected to remain relatively high in medium to long term as key issues that affected major markets across globe are yet to be resolved. If Fed confirms possible pause in rate hike during upcoming monthly FOMC update, it will greatly boost demand for gold as lower interest rates / pause in rate hike cycle in positive for gold given lower value of Greenback which will improve participation from emerging markets, India  & China – gold’s biggest consumers in terms of volume.

Spot Silver XAGUSD is trading at $15.60 per ounce down by 0.30% on the day. US spot crude oil has been trading in green since trading session began post-holiday season boosted by OPEC’s production and supply cut which became effective since January 2019. Oil price action is also recovering on hopes that US oil producers will soon take action as recent decline in crude price combined with increasing US inventory stockpile and production output has begun to hurt US energy industry as well. So far this month spot crude has gained nearly 8% and price is expected to continue moving up on optimism surrounding Sino-U.S. trade talks as China is Crude oil is biggest importer and an end to trade war is expected to greatly boost Crude oil price across broad market. WTI futures in international market is up more than 1% in European market hours while spot us crude oil WTIUSD is trading at $48.95 per barrel up by 0.64% on the day.

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