Precious Metals Steady On Caution Ahead of ECB MPC Update

Precious metals rebound on risk-averse investor sentiment and caution ahead of ECB monetary policy meeting update.
Colin First
Gold price bars and chart

Precious metals saw positive price action for the first time this week today. Global equities have been trading with a bearish tone since the start of this week despite positive macro data outcome and headlines hinting at progress in Sino-U.S. trade talks. However, consecutive trading sessions that saw dovish price action in the global market resulted in investor sentiment turning a bit risk-averse. Further, strong USD supported by upbeat US T.Yields also pressured both safe haven assets for major forex currency pairs resulting in the forex market seeing steady downside price action as well. However, a strong USD and profit booking activity took the price of precious metals to new multi-week lows. Low precious metal price action, risk-averse trading activity in equity and forex markets, dovish cues from US Wall Street all added up to give precious metals some level of breathing space during the trading session yesterday.

As the global market continued to be dominated by bears and caution ahead of the European Central Bank’s interest rate decision resulted in less activity in the risk assets market, precious metals finally found some level of fund flow and activity. Risk-averse investor sentiment also supported precious metal bulls and helped today’s rebound price action. While costly USD usually discourages participants from the international market to invest in gold owing to higher exchange rate, current scenario which hints at standstill Brexit proceedings, possibility for ECB’s forward guidance to take a dovish tone, China’s reduction in growth target and lack of further headlines relating to Sino-U.S. trade deal boosted safe-haven demand in market. This helped the precious metals market see some level of fresh fund flow inducing rangebound price action with a bullish bias. As of writing this article, Spot gold XAUUSD is trading at $1288.50 per ounce up by 0.07% on the day while US Gold futures GCcv1 were trading flat/unchanged at $1287.50 per ounce.

Crude Oil Rebound Capped By US Crude Oil Stockpile

Meanwhile, spot silver XAGUSD is trading at $15.08 per ounce up by 0.11% on the day. Crude oil price rebound in the spot market today following two consecutive trading sessions of dovish price action. There are no major updates in the market today that could be pointed out as the reason for rebound activity which suggests that bears have exhausted themselves in the short term. For now, US sanctions on Iranian & Venezuelan crude oil exports and OPEC enforced production and supply cuts have helped improve supply-demand ratio in the global market and this continues to serve as a fundamental factor supporting crude oil bulls. However, a continued increase in US crude oil stockpile data continued to hinder any chance for a sharp increase in crude oil price in the broad market. Spot US Crude oil WTIUSD is trading at $56.69 per barrel up by 1.25% on the day.

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