Gold:
Golds supremacy has come to a halt after seeing highs of $1,214.28 on Tuesday. It is natural for the price to retrace after seeing a bull run, however the bull run for gold have been very short lived. The profit taking has pushed the price of the yellow gold to $1,210.70. One of the reason that we have seen the weakness in the gold price is because the US economy is standing on robust ground and consumers are feeling confident about this as this was evident in yesterday’s economic data. The most vital factor which is in play is the fed rate hike cycle. The rate hikes are pushing investors the dollar higher and for investors dollar is more favourite instrument. Of course in the recent geopolitical events, we have also seen a new where investors have favoured dollar as a safe haven rather than gold
The profit taking has pushed the price of the yellow gold to $1,210.70. One of the reason that we have seen the weakness in the gold price is because the US economy is standing on robust ground and consumers are feeling confident about this as this was evident in yesterday’s economic data. The most vital factor which is in play is the fed rate hike cycle.
The rate hikes are pushing investors the dollar higher and for investors dollar is more favourite instrument. Of course in the recent geopolitical events, we have also seen a new where investors have favoured dollar as a safe haven rather than gold
Therefore, one of the ultimate reasons behind gold dropping and the greenback rising is due to the actions carried out by the fed. Moreover, interest rate hikes being scheduled to commence in September and December are acting as a negative concern for gold as investors will pull away from the precious metal and pull in to the dollar.
Oil:
U.S. sanctions on Iran have overthrown the doubt the markets may have had regarding an economic growth slowdown affecting the oil prices and demand. Sanctions on Iran without any doubt would have an impact on the global economic growth and of course on the supply side. But the concerns on the supply side are stronger hence we expect the price to recover some of its losses.
Another major factor which has given a reason to traders to have qualms around the demand equation is the on going spat between the US and China over the trade tariffs.
Initially, U.S. and China carrying out a duel of tariffs against each other brings about concern regarding demand in the economy as growth could be a vital consequence by these tariffs. However, at present sanctions being placed on Iran have moved the oil prices up. Also, looking at the supply equation, it becomes clear that the OPEC is only modestly increasing the supply which should help the price in the longer term.
We expect the price Brent to continue to move towards its resistance level of $79 as long as the support at $70 holds.
