Precious Metals on Bear’s Path as USD Gains Strength from Hawkish Fed Update

Gold prices fell on Thursday, after hitting a one-week high in the previous session, as fears of another round of U.S. tariffs on China and expectations of higher interest rates lifted the dollar. U.S. and Chinese officials met for the first time in over two months to find a way out of their deepening trade conflict, but there was no evidence the low-level discussions would halt a new round of U.S. tariffs due to go into effect today.

Gold which has fallen nearly 13 percent since hitting a high of $1,365.25 in April has lost its appeal as a safe haven amid a Turkish currency crisis and U.S.-China trade disputes, as investors increasingly flock to the U.S. dollar instead. The fear of rate hikes is also pressuring gold. Despite Donald Trump’s recent attack on rising interest rates, Fed is expected to remain on path of rate hikes as long as macro data points to strong economic status in U.S. As of writing this article, spot gold XAUUSD is trading at $1188.46 down 0.59% on the day while US Gold Futures GCcv1 is trading at $1195.20 an ounce down 0.67% on the day.

The dollar weakened Precious Metals Momentum Despite Pressure from Trump Woes

Minutes of the Federal Reserve’s latest policy meeting suggested the U.S. central bank is on course to further raise interest rates after it raised rates twice this year. Interest rates increase the opportunity cost of holding non-yielding gold while boosting the dollar, in which it is priced.

Markets are now keeping a close eye on the Fed’s economic symposium in Jackson Hole, Wyoming, starting Friday for any change in stance from the central bank, especially after President Donald Trump’s attack on its monetary policy early this week. Legal woes stemming from trouble that member of Trump’s inner circle are facing and his continued attack on the Fed could be enough to force investors to close out their record short position in precious metals. Spot silver XAGUSD is trading at $14.57 down 1.16% on the day.

Crude oil futures were stable to marginally lower amid mild profit-taking in the mid-morning trade Thursday after a more than $2/b surge in both benchmark contracts overnight. Oil prices surged overnight on a surprise 5.8 million-barrel draw in US crude inventories reported by the US Energy Information Administration Wednesday for the week ended 17.

The EIA data supported American Petroleum Institute data Tuesday of a 5.17 million-barrel draw in US crude stocks to 405.6 million barrels and exceeded analyst expectations of a 3.37 million-barrel draw in S&P Global Platts’ survey Monday. This fall is believed to be the result of the fall in imports, which slid the most in six weeks to 7.52 million b/d. Spot crude WTIUSD is trading at $68.58/b down 0.52% on the day.