Weak US Dollar in Global Markets Underpin Demand For Precious Metals

Gold traders near 8-month highs on weak US dollar in broad market as investors await Sino-U.S. trade talk related headlines for directional cues.
Colin First
Gold daily chart, January 22, 2019

Precious metals continue to trade positively in the broad market supported by broad-based weakness surrounding US Greenback on dovish Fed comments. While risk appetite in relatively high in the broad market, weaker USD in the broad market helped boost participation from emerging markets underpinning demand for precious metals. US Fed yesterday released a statement which was high in contrast to prior updates. MPC committee decided to take a wait and watch approach on U.S. economy and stated that they may even reduce rates depending on the economic scenario as opposed to delayed rate hike plans announced earlier. Further, Jerome Powell’s comments that Portfolio reduction will depend on U.S. economic activity and that economy has slowed down owing to an ongoing trade war and the recent partial shutdown of U.S. government weighed down US dollar significantly.

Crude Oil Price Declines Slightly on EIA Update

Powell stated that balance sheet reduction program may end earlier than expected as U.S. economy is slowing down resulting in US Dollar losing ground against major risk assets and emerging market currencies. Investors now await Sino-U.S. trade talk outcome for directional cues as a negative outcome will lead to a further decline for US dollar and steady long term demand for safe-haven assets. However, increased price of precious metals continues to limit activity in major gold markets – China & India. As of writing this article, spot gold XAUUSD is trading at $1322.06 per ounce up by 0.18% on the day while US gold futures GCcv1 were trading at $1326.10 per ounce up by 0.80% on the day. Meanwhile, spot silver XAGUSD is trading at $16.075 per ounce 0.15% on the day. Crude oil price trades range bound post two consecutive sessions of a sharp rise in value.

The downside move is limited owing to the influence of OPEC’s production and supply cut enforcements and U.S. Sanctions on Venezuelan crude oil which has caused a temporary disruption in global supply. While crude oil opened on positive note and traded in green in early Asian market hours, EIA’s report which hinted that stockpiles continue to rise despite reduced supply from Saudi Arabia to the U.S.A. as part of OPEC’s production cut. This hinted that U.S. production of crude is near record highs and is likely capable of offsetting any supply disruption in the market even if only for short duration of time. This caused crude oil price in the spot market to fall and as of writing this article, spot US Crude oil WTIUSD is trading at $53.97 per barrel down by 0.15% on the day.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All

Top Promotions

Top Brokers

IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US