The gold price has made six years high by touching the level of 1,535 on 13 August. However, the price has retraced from this level. Speculators are wondering if the price is going to move back above the 1,500 mark, especially after the birth of this new optimism that the US economy may not fall into a recession, and more importantly, the US-China trade war isn’t getting any worse.
Remember, the US Fed is more likely to cut the interest rate to support the growth only if the trade war continues. Eric Rosengren, Boston Fed president has made it clear that the Fed should not be cutting the interest rate just because of the trade war. It seems that for him external affairs do not matter that much. He is not the only hawkish member and this is worrying gold traders. Also, the Fed’s main mandate is their economic numbers and the weakness in the economic numbers isn’t that bad.
Talking about economic numbers and Fed stance, investors are going to focus on the upcoming Jerome Powell’s speech. Donald Trump has called for another 100 basis points cut in the interest rate, and of course, not many agree with him.
If Wednesday’s minutes show that the Fed is likely to cut the rates again, it is possible for the gold price to make another high and break above the 1,535 mark and finally make its move towards the 1,550 mark which we have discussed before. However, if for some reason the Fed’s minutes and Jerome Powell do not signal another possibility of a rate cut, then it is likely that the gold price may move all the way to 1450 or even lower.
One also need to keep in mind that gold also acts as a safe-haven currency. The monetary policy over in Europe hasn’t worked and now the central bank and local governments are trying their best to secure whatever help they can to restore growth. This is the key reason that the biggest economy of the eurozone, Germany has taken its last weapon out of the box-the fiscal policy and the country is ready to spend big to spur that growth. If this becomes a reality, it is likely that the gold price may continue to move higher.
Oil Simply Need More Demand
As for the oil market, there is only one fundamental which matters the most, it is demand. It appears that traders have grown immune to geopolitical risks or uncertainties which increased after an attack on the Saudi oil field. But if we look at the oil price, it hasn’t exploded in the way it should have been.
The Saudi’s do say that the attack which happened isn’t going to impact the production, but in all essence, the oil field has the production capacity of one million barrels a day and this isn’t a small number. However, as we said earlier that these factors aren’t the focal point for traders because speculators did try their best to push the price higher but they failed miserably.
Investors need strong demand for oil, and for that to happen, we must see truce between the US and China-the two biggest economies of the world. The White House is highly likely to extend an exemption for another 90-days and this has improved the sentiment. But still, this isn’t enough to eradicate the overall weakness or the dull picture which we currently have.
Investors will also be looking at is the US stockpiles and the expectations are that the number has fallen for the first time in nearly three weeks. Any drop in the official data may help the oil price.