Precious Metals Gain On Weak US Dollar

Optimism surrounding Sino-U.S. trade talks limits gains in the precious metals market but boosts crude oil price.
Colin First
Gold Price, Commodities Investment

Precious metals are currently trading positive owing to subdued US dollar in the broad market.  While weak US dollar can be viewed as a trigger for positive price action in precious metals market the real demand for assets stems from political proceedings in US markets. US President Donald Trump last Friday declared a state of emergency in a bid to circumvent congress ruling and divert government funds for his border wall project between US & Mexico. This unexpected move caused the US Dollar to lose all the gains made over the last two weeks in a broad market. Speculation in the market is that this move will not facilitate President Trump to get enough funds for his border wall project but cause an equal impact on the American economy similar to the partial government shutdown.

Crude Oil Climbs To 3-Month High on Sino-U.S. Trade Talk Optimism

This helped major dollar-denominated Forex currencies to gain positive price action in the market on Friday and positive price action has continued across Asian and European session today. Weaker dollar improves participation from emerging markets owing to a lower exchange rate for investors who hold other currencies. As of writing this article, Spot gold XAUUSD is trading at $1324.93 per ounce up by 0.27% on the day having hit a 2-week high at $1325.21 per ounce earlier in the day. Meanwhile, US gold futures GCcv1 were trading at $1328 per ounce up by 0.44% on the day. At the same time, spot silver XAGUSD is trading at $15.79 per ounce up by 0.07% on the day.

A weaker dollar is always positive for the dollar, but improved risk appetite on Sino-U.S. trade talk related optimism continues to limit gains. While Sino-U.S. trade talk related headlines are proving to be the bane of precious metal bulls, it has proved to be a positive influence for crude oil price in broad market as trade deal between two nations would lead to increased imports in China the largest importer of global crude oil. Given the current reduction in global supply owing to enforcement of OPEC’s reduced production and supply and US Sanctions on Venezuela and Iranian Crude oil price is likely to go up when demand increases from China. In the futures market, Brent and WTI futures hit new monthly highs and broke past $65 & $55 handle resistance which signals further upside move from a technical perspective. Spot US crude oil WTIUSD is trading at $55.99 per barrel up by 0.41% on the day having hit new 3-months high at $56.24 per barrel earlier in the day.

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