Precious Metals Move Up On Safe Haven Demand Amid Subdued USD In Broad Market

Yellow metal gains as US Dollar is starting to lose its place as safe haven asset among global investors while increasing risk aversion has resulted in fund flow move towards most reliance recession proof asset in history – Gold
Colin First
Gold daily chart, December 05, 2018

Gold hit a high of $1,243 on Tuesday – the level last seen on Oct. 26. The price of yellow metal is currently a bit lower compared to 5.5-week highs hit yesterday but is expected to rise even further in short-term as the latest bull run is backed by curve inversion in the US. The spread between the 5-year and 2-year treasury yields turned towards downside (inverted) earlier this week triggering a bearish rout across Wall Street and major global equity markets, validating the argument that curve inversion is an advance indicator of economic recession.

The risk aversion will likely worsen, sending the greenback lower if the spread between the 10-year and 2-year turns negative. Markets are trying to consolidate recent gains before trying to push up higher for now.

Oil Price Action Subdued Ahead of OPEC Meet Scheduled Later Today

A balance between a host of factors such as a rate hike by the U.S. Federal Reserve in December, uncertainty about trade tensions between Washington and Beijing, and a flattening yield curve has helped create a premium for the bullion in short to medium term. Fed policymakers will gather at a Dec. 18-19 meeting, at which the central bank is widely expected to raise interest rates. While rate hike is already priced in markets will be closely watching the meeting for clues on rate hike timings in 2019.

If the meeting echoes a similar message to (Chairman Jerome) Powell’s dovish shift, gold has the potential to shine into 2019. As of writing this article, Spot Gold XAU/USD is currently trading at $1235.04 an ounce down by 0.15% on the day, while US gold futures GCcv1 is trading at $1241.10 an ounce down by 0.08% on the day.

Spot Silver XAG/USD is currently trading at $14.39 an ounce down by 0.70% on the day. Oil prices fell along with weak stock markets during early Asian market hours but volatility was relatively low ahead of meeting by producer group OPEC that is expected to result in a supply cut aimed at draining a glut that has pulled down crude prices by 30% since October.

The Organization of the Petroleum Exporting Countries (OPEC) is meeting at its headquarters in Vienna, Austria, later today to decide its production policy. Led by Saudi Arabia, OPEC’s crude oil production has risen by 4.1 percent since mid-2018, to 33.31 million barrels per day (bpd). Oil output from the world’s biggest producers – OPEC, Russia and the United States – has increased by a 3.3 million bpd since the end of 2017, to 56.38 million bpd, meeting almost 60 percent of global consumption. The meeting is expected to see supply cut from member nations by around 1 million barrels per day. As of writing this article, Spot US crude WTI/USD is trading at $52.46 per barrel down by 0.74% on the day.

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