Precious Metals Decline Ahead of FOMC Update

Gold declines but caution in the global market owing to geopolitical issues helped prevent high loss.
Colin First
Gold daily chart, March 20, 2019

Precious metals today saw a slight decline following three consecutive trading sessions of gains. While price action still remains well above critical price levels investors have opted to go on profit booking spree ahead of tonight’s FOMC update. Despite profit booking activities the price has managed to stay well above critical support levels owing to multiple factors such as weak US Dollar, renewed tensions surrounding Sino-U.S. trade deal, and Brexit saga. Geopolitical events continue to stretch timeframe for resolution and don’t seem close to resolution any time soon and this has caused precious metals to find increasing demand once again.

Renewed Sino-U.S. Trade Tension Underpins Gold Bulls But Weighs Down Crude Oil Bulls

A significant part of global investors wish to protect their portfolio and investment from seeing sharp loss and as a result, have restructured their portfolio in a way that allows a steady stream of funds to flow into precious metals. A steady fund inflow is likely to prevent sharp declines even if there is no increase in price value and helps the market recover back to familiar price levels even if there is a sudden bout of profit booking activity or selling pressure. In today’s market, investors are worried not just about geopolitical events but hold caution owing Fed forward guidance which most investors expect will be highly dovish in nature.

As of writing this article, spot gold XAUUSD is trading at $1304.17 per ounce down by 0.20% on the day while US gold futures GCcv1 is trading at $1303.80 per ounce down by 0.20% on the day. Meanwhile, spot silver XAGUSD is trading at $15.31 per ounce down by 0.35% on the day. Crude oil price traded lower in Asian and European markets today. The dovish price action was a result of reduced trading activity and participation from retail traders. Most retail traders in the crude oil market are speculators. After crude oil hit new 2019 high’s in yesterday’s trading session, there was sharp increase in profit booking activity as renewed tensions on Sino-U.S. trade talks weighed down crude oil bulls. This prevented traders from placing new bets post profit booking activity. However, OPEC production cut enforcement continues to underpin crude oil bulls preventing sharp declines. Spot US Crude oil WTIUSD is trading at $58.47 per barrel down by 0.90% on the day.

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