Precious Metals Move Uptrend but Strong USD Limits Momentum

Gold inched up on early Asian market hours but faced resistance as worries of looming U.S. tariffs on China kept dollar firm in the broad market.
Colin First
Gold weekly chart, September 03, 2018

Gold inched up on early Asian market hours today supported by physical buying as the dollar remained under pressure, but a weaker Yuan amid worries of looming U.S. tariffs on China capped the metal’s gains. Spot gold XAUUSD was up 0.43% at $1,201.72 as of writing this article, after rising 0.50% in the previous session.

Meanwhile, US Gold futures GCcv1 was rose 0.58% at $1,208.30 an ounce. A bit of weakness in the U.S. dollar has stabilized selling activity surrounding gold from earlier this week. Gold gained positive sentiment on signs of the increase in physical demand, in particular in India. Gold is expected to close the week on a positive note as few analysts said that present price levels have invoked a lot of physical buying in not just active gold buying countries like India and China, but in Southeast Asia for investment purposes.

Fed Rate Hikes, Trade Tensions and EM Currency Crisis Affect Precious Metals Price Action

India’s gold imports more than doubled in August to hit their highest level in 15 months as lower prices prompted manufacturers to replenish inventory. Yuan weakened against the dollar on Thursday as investors braced for more sweeping tariffs expected soon from Washington, making gold expensive for buyers in the world’s biggest consumer.

Precious metals have been under pressure for most of this year on rising interest rates, global trade tensions, and an emerging market currency crisis, with investors parking their money in the dollar, undermining their safe-haven status. Markets will be closely watching a U.S. employment report due tomorrow for clues on the pace of interest rate increases by the Federal Reserve. Spot Silver XAGUSD is trading at $14.27 an ounce up 0.54% on the day.

Crude oil futures were mixed during mid-morning trade in Asian market hours today as latest US inventory data and supply concerns elsewhere kept prices volatile. US crude inventories fell 1.2 million barrels in the week ended August 31, while gasoline and distillate inventories rose 1 million barrels and 1.8 million barrels respectively, according to analysts quoting American Petroleum Institute data released Wednesday.

More definitive US inventory data for the week is due for release by the US Energy Information Administration later today. Easing concerns over the impact of Tropical Storm Gordon also helped to lower NYMEX WTI prices. Meanwhile, ahead of the second round of US sanctions targeting Iran’s oil sector kicking in on November 5, exports of Iranian oil in August sank to a seven-month low, according to data from S&P Global Platts’ trade flow software. Spot Crude WTIUSD was trading at $69.19/b up 0.10% on the day.

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