Precious Metals Retain Some Level of Positive Price Action on Safe Haven Demand

There is some safe-haven buying supporting gold prices today as fed forward guidance renewed fears of US T.Yield curve inversion
Colin First
Gold daily chart, December 20, 2018

Gold prices edged higher on Thursday supported by a softer dollar and weakness in the equities market, after the U.S. Federal Reserve delivered a less-dovish outlook on monetary tightening than many had expected. In a widely anticipated decision, the U.S. central bank hiked interest rates by 25 basis points on Wednesday.  But Fed’s decision to retain the core of its plan to tighten monetary policy, despite rising uncertainty about global economic growth surprised investors.  Fed forward guidance renewed investors fears of curve inversion in US T.Yields as the decisions is expected to induce a faster drop in the spread between the 10-year and two-year Treasury yield  which combined with price action in US equity market hints at biggest December decline since 1931 boosting safe haven demand.

Crude Continues to Decline on Rising Production and Inventories

The Dollar index which measures the strength of US Greenback against six major global currencies is currently at 96.72 down by 20.27% on the day. Investors also directed fund flow from equity markets to safety of government bonds which is near eight-month lows in early European market hours. The upside move of gold is expected to be capped in short term to medium term as Gold is sensitive to higher interest rates because they boost the dollar, making bullion more expensive for buyers using other currencies. As of writing this article, Spot gold XAUUSD is currently trading at $1249.08 per ounce up by 0.49% on the day while gold futures GCcv1 is trading at $1252.90 per ounce down by 0.27 on the day. Spot silver XAGUSD is trading at 14.62 per ounce up by 0.17% on the day.

Oil prices fell on Thursday to erase most of their gains from the day before, resuming declines seen earlier in the week amid worries about oversupply and the outlook for the global economy. Yesterday’s recovery is viewed as short-covering owing to Investors shifting their attention towards deteriorating fundamentals in the oil markets including more signs of slowing economic growth next year, record production and the lack of confidence with OPEC’s pledge to curb production. Volatility in crude prices this week has driven investors to shut their positions and is draining liquidity from the market as crude oil price is down more than 30% from peaks seen in October while production is near record high in US, Russia and Saudi Arabia ahead of OPEC’s planned production cuts from January 2019. Spot US crude WTIUSD is currently trading at $46.44 per barrel down by 1.45% on the day.

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