Risk off sentiment pushing gold higher while crude investors focus on the supply side
Gold has begun to see the light while dollar faces weakness as it rose twice in the past two days. The greenbacks momentum being disturbed allows the precious metal to creep up and gain strength. This in turn has allowed investors with currencies other than the dollar to grasp the opportunity and buy cheaper gold. Spot gold had seen an increase of 0.3 percent which allowed the price to rise to $1,199.36. The yellow metal had touched the $1189 region on the 4th August. However, from this point onwards it has risen fairly. This alone emphasises how a weaker dollar can benefit gold.
The comeback is additionally supported by physical gold being purchased by investors. In addition, the current growth levels of gold and dollar weakening has enforced countries to invest more into the physical precious metal. In fact, India has gripped on to this opportunity of a weaker dollar to the point where gold imports have doubled this month in order to replenish gold to meet demand of the yellow metal. The gold imports in India has hit its highest in the last 15 months. Furthermore, a stronger decline in the dollar could drive the gold prices higher to the point of strong stability.
Oil prices on the decline is primarily because of the emerging market crisis which is present. The market price for U.S. West Texas Intermediate crude futures had dropped by 12 cents from the last session leaving the price at $68.60 per barrel. Additionally, Brent crude futures had dropped by 5 cents totalling the price to $77.22 per barrel. The decline in both prices is not solely due to the emerging market crises. The second reason is today marks the deadline for the U.S. trade tariffs of $200 billion on Chinese imports which brings about a lot of tension in the markets.
The possibilities of oil prices decreasing further in price are apparent. The Organisation of the Petroleum Exporting Countries sourcing more oil to cover the losses from Iran is up and coming which could affect the price. However, the markets are not yet exposed to the real rage of the U.S. sanctions on Iran will have. This is because at present the markets only receive a teaser of what is to come.
However, OPEC has stated that they believe oil demand to break into 100 million bpd for the first time this year. Therefore, this does provide some comfort to the markets as if demand is high at this rate and OPEC are successful in sourcing oil production to cover the losses in supply then the price may become balanced. However, for now due to recent and an on-going crises and trade tariffs, oil price has seen a decline. But this is to an extent as U.S. sanctions on Iran still support the price as supply drops.