Precious Metals Trade Positive On Subdued US Greenback

Precious metals trade positive on weak greenback despite increased risk appetite as investors are divided on their approach towards risk asset in broad market.
Colin First
Gold weekly chart, January 07, 2019

Gold continues to trade positive as trading session began for the second week of 2019 despite increased risk appetite in market today as global investors are currently divided into two groups. Gold has managed to retain its positive price action in global markets from December 2018 well into January 2019 as market still sees continued demand for safe haven assets. The month of January 2019 has both high impact macro calendar schedule and high impact geo-political events which will increase volatility in risk assets. As non of major geo-political and economic issues have been resolved yet with headlines continuing to hint only at passive progress, many investors have chosen to redirect funds in their portfolio from risky asset to safe haven assets to shield their investment from volatile market.  This week sees two major geo-political events addressed by respective parties – Brexit and Sino-U.S. trade negotiations.

Weak USD Continues To Support Gold Amid Increased Risk Appetite

While investors are hoping for positive outcome on both fronts, headlines suggest possibility of two way move. The outcome could either be positive or negative based on how the parties involved address the issue on their hand. China which is focused on improving its economy has suffered significant economic slowdown owing to ongoing tariff-war which President Trump believed could be used to force their hand. But Chinese Premier is clear on his Pro-China stance similar to President Trump’s America first approach. Depending on how to key factors namely intellectual property theft and US Ban on Chinese tech brands on addressed the deal could end on positive or negative note. Friday’s positive outcome in U.S. NFP data and fed Chair Speech which hinted at possibility to pause rate hike planks for 2019 based on macro data outcome boosted investors risk appetite and equity market performance across globe. However weaker greenback in broad market is positive for gold as it boosts participation from emerging Asian markets which are biggest consumers of gold on low exchange rate.

A pause in fed rate hikes also boosts gold as the scenario will boost value of gold on cheap US Greenback. As of writing this article, spot gold XAUUSD is trading at $1290.19 per ounce up by 0.43% on the day while US gold futures GCcv1 traders at $1291.70 per once up by 0.45% on the day. Spot Silver XAGUSD is trading at $15.75 per ounce up by 0.33% on the day. Crude Oil gained in both spot and futures markets since trading session began for the day with price action receiving fundamental support from macro data and geo political events. Increased hopes that Sino-U.S. trade negotiations will have favorable outcome and production/supply cut from OPEC members are main factors which support oil price. Investors are also hoping that US markets would take action soon as increased production and inventory amid low crude price is beginning to affect US energy market. Spot Crude WTI/USD is currently trading at $48.84 per barrel up by 1.29% on the day.

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