Precious Metals Edge Down Over Strong Demand For US Greenback

There are two camps diverging around the likely performance of the stock market, particularly in the short-term which is creating a push and pull for the gold market where we have seen some interest return on the back of those losses.

As of writing this article, Spot Gold XAUUSD is trading at $1228.32 an ounce down by 0.42% on the day, while US Gold futures GCcv1 is trading at $1230.60 an ounce down by 0.42% on the day. The market continues to trade in a risk-averse fashion which has resulted in stable upward price action for US Greenback. The flow hasn’t been completely one-way and there is still some caution around the sell-off being potentially short-lived.

Oil Price Goes Down Over Increased Demand For US Greenback

And that has resulted in investors not fully switching out of equity markets into gold. This interruption in fund flow from equity market combined with an increase in demand for the US as safe haven supported by interest rate hike from US Fed and increasing bond yields has resulted in dollar-denominated precious metals taking dovish price action as non-interest yielding assets make it costly for investors to hold when US Greenback value goes up.

Worries about China’s slowing economy spread across Asian markets today morning taking cues from US stock futures which have been trading in red since late Friday and much of momentum for yellow metal moving forward this week will be the result of influence surrounding US Greenback. Meanwhile, Spot Silver XAGUSD is currently trading at $14.617 an ounce down 0.54% on the day.

Oil prices dipped on Monday amid cautious sentiment as a plunge in financial markets last week and dollar strength early this week underscored concerns that growth may be slowing, especially in Asia’s emerging economies. Investors remained wary after hefty losses last week, while a stronger dollar on safe-haven buying puts pressure on the purchasing power of emerging markets. Hedge funds slashed their bullish wagers on U.S. crude in the latest week to the lowest level in more than a year, the U.S. Commodity Futures Trading Commission said on Friday as US sanctions on Iran looms more closely than ever.

On the supply side, however, oil markets remain tense as sanctions are set to start next week and are expected to tighten supply, especially to Asia which takes most of Iran’s shipments. However, there are signs of a slowdown in global trade, with rates for dry-bulk and container ships – which carry most raw materials and manufactured goods – coming under pressure. Spot Crude WTIUSD is trading at $67.27 per barrel down by 0.37% on the day.