Precious Metals Edge Up amid Low Demand for USD on Easing Trade War Woes

A weakening dollar continued to push gold higher as impact from trade war woes was less than expected.
Colin First

Gold prices inched higher on Thursday as the dollar softened amid easing Sino-U.S. trade tensions, but investors remained cautious ahead of next week’s U.S. Federal Reserve policy meeting. The risk is sort of flattening, but that’s also taking the wind out of the safe-haven appeal of the U.S. dollar, however, Gold could move back above $1210 handle in case the dollar weakens against the emerging market currencies as well as the euro.

However, there is not much of an appeal for gold as the market is not packing in a lot of punch to trade war. The current weakness surrounding USD indicates that worries over trade tensions have eased as the tariffs were seen to be at lower levels than what was initially announced. The dollar hovered near a seven-week low against a basket of major currencies on Thursday, as safe-haven demand for the U.S. currency ebbed on relief that the Sino-U.S. trade war may not be as damaging as once feared.

Russian Crude Hits 4 Year High On Spike in Demand From China

As of writing this article, Spot Gold XAUUSD is trading at $1204.91 an ounce up 0.08% on the day while US Gold futures GCcv1 were trading at $1209.70 an ounce up 0.11% on the day. Investors are now awaiting next week’s Federal Reserve meeting. The U.S. central bank is widely expected to raise benchmark interest rates and shed light on the path for future rate hikes. Recent Fed commentary has implied a steady pace of tightening so anything that calls that into question will be positive for gold and other precious metals.

This week’s rise in yields comes ahead of what is expected to be a hawkish meeting of the U.S. Federal Reserve next week. 113 economists in the Reuters poll forecast the Fed to hike rates when it meets Sept 25-26. It is expected to follow that up with one more before the end of this year, taking the fed funds rate to 2.25-2.50 percent. Meanwhile, Spot Silver XAGUSD is trading at $14.30 an ounce up 0.45% on the day.

Oil rose for a third day on Thursday amid another drawdown in U.S. inventories and strong U.S. gasoline demand, while signs that OPEC may not raise output to address shrinking supplies from Iran also supported prices. U.S. crude oil stockpiles fell for a fifth straight week to 3.5-year lows in the week to Sept. 14, while gasoline inventories also showed a larger-than-expected draw on unseasonably strong demand, the Energy Information Administration said on Wednesday.

Crude inventories declined by 2.1 million barrels, the EIA data showed, compared with expectations for a decrease of 2.7 million barrels. Meanwhile, spot premiums for Russian ESPO Blend crude hit their highest in more than four years, buoyed by a jump in Chinese demand for crude. Spot Crude WTIUSD is currently trading at $71.53/b up 0.22% on the day.

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