Fed rate hikes expected to weaken gold further
Gold:
Gold has experienced minor losses prior to the last close. This is primarily because of the dollar gaining strength as fed rate hikes approach and the worries of U.S. and China trade disputes continuing. It is no secret, that while the dollar gains strength and stays in the lead, gold will fall back in result of this. Moreover, the solid positive non-farm payrolls had modestly forced downward pressure on gold. Referring back to the data that had been released on Friday, as it was much stronger than expected it has allowed investors to understand that the fed moving forward with the rate hikes are pretty much certain. The federal reserve banks decision to increase interest rates will commence in the month of September which would mean this is going to be the third rate hike. Therefore, from this alone, it is evident that the fed is motivated to continue rate hikes, which will lead to the dollar weighing down on gold.
The end for the greenbacks increase in strength does not conclude at rate hikes. It continues to drive to power via the assistance of Trumps decisions of enforcing an additional $267 billion worth of tariffs on Chinese imports, along with the $200 billion he had already promised to enforce previously. Moreover, at present the U.S. is holding the upper hand in trade wars and escalating. However, China will retaliate, then the question of can the U.S. hold stability will rise.
U.S. drilling being stalled causes shortage in supply
Oil:
Oil prices back on the rise while U.S. drilling comes to a halt and sanctions on Iran approach. Two oil rigs being shutdown has caused an immediate effect to the prices of oil where Brent crude futures increased by 0.65 percent totalling the price per barrel at $77.33. The rig count which currently sums to 860 has seen stagnation since May this year.
Sanctions being placed on Iran by the U.S. which are expected to be executed in November, are additionally allowing the price to increase. This is because more countries cut off supply from Iran as we approach November. Moreover, India and China are cutting back on supply from Iran which were the two countries that had initially resumed trade with Tehran. On the other hand, to some at this point it may seem that supply for oil is at risk. However, Washington has begun to place weight on various other countries especially Saudi Arabia and Russia which are the world’s biggest exporter and producer to keep output high in order to keep supply and demand balanced.
