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Precious Metals Move Down on Increased Risk Appetite in Equity Markets

By:
Colin First
Updated: Oct 31, 2018, 09:50 UTC

Yellow metal loses luster as risk appetite increases in major equity markets across the globe.

Gold

Gold prices fell to a more than two-week low on Wednesday as equities gained and the dollar touched multi-month highs after upbeat economic data indicated a robust U.S. economy. The yellow metal, however, remained on track to end a run of six straight monthly losses, the longest such streak since early 1997. Gains in the dollar are impacting dollar-denominated gold negatively.

After robust recent economic data, the U.S. non-farm payroll data is also expected to be positive and this could result in US Greenback getting a bullish boost which could affect price action of gold in short term. As of writing this article, Spot gold XAUUSD is currently trading at $1217.53 an ounce down by 0.45% on the day, while US Gold futures GCcv1 is trading at $1218.10 an ounce down by 0.58% on the day.

Crude Oil Price Rebounds Post Overnight Declines

As long as inflation doesn’t become a real threat or equities plunge much further from current levels, many investors will prefer yielding instruments than investing in gold especially since the outlook for the dollar is positive compared to gold in medium to long term. Dollar index DXY which measures the strength of the dollar against six major currencies rose to 16-month highs versus its key rivals on continued strength in the U.S. economy and better than expected US macro data.

The market is also awaiting the verdict of next week’s U.S. mid-term elections for a direction, which could affect price action of US Greenback in short-term and result in some volatility in the precious metals market. In immediate future, gold is expected to trade range bound with the slight bearish incline as equity markets are expected to perform positive owing to increased risk appetite among global investors.

Spot Silver XAGUSD is currently trading at $14.36 an ounce down by 0.74% on the day. Oil prices had settled sharply lower on Tuesday due to heightened trade tensions between China and the US. Crude oil futures retraced losses in mid-morning trade in Asia Wednesday following a sharp overnight decline, though the near-term outlook remains volatile.

The near-term outlook for energy markets remains underpinned by bearish factors as investors await US inventory build this week. Analysts surveyed on Monday by S&P Global Platts were expecting US crude supply to rise by 3.3 million barrels to 426.1 million barrels in weekly data due for release later today. Spot crude WTIUSD is currently trading at $66.70 per barrel up 0.68% on the day.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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