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FXTM: Gold Pressured By Dollar Amid Rising Trade Tensions

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Gold has “descended into the abyss” despite intensifying trade tensions rattling financial markets and leaving investors on edge, with an appreciating U.S. dollar the main factor pushing the precious metal lower, says Lukman Otunuga, research analyst at FXTM. “With the dollar likely to find ample support amongst the bullish sentiment towards the U.S. economy and heightened expectations of higher U.S. interest rates, gold could be poised for further punishment,” Otunuga says. “While the argument for the precious metal to potentially rebound may be based around trade tensions and geopolitical uncertainty, an appreciating dollar could continue obstructing any upside gains.” Based on the technical charts, gold is under pressure on the weekly timeframe, the analyst says. “Sustained weakness below [the] $1,280 level could be an early indication that bears are back in the game,” Otunuga continues. “Previous support at this level could transform into a dynamic resistance that opens a path towards $1,264.” As of 8:50 a.m. EDT, spot gold was $4.40 lower to $1,273.50 an ounce.

By Allen Sykora of Kitco News; asykora@kitco.com

 

Commerzbank: Gold ETFs Post Outflows Of 4.5 Tonnes

Tuesday June 19, 2018 08:55

Gold exchange-traded-fund investors have exited some of their bullish positions as global trade tensions intensify, says Commerzbank. “We find it incomprehensible that gold should not be in demand in the current market environment, characterized as it is by high levels of uncertainty, and is trading instead close to its lowest level since late 2017,” the bank says. “And as if this were not enough, ETF investors actually jettisoned some of their holdings yesterday. The gold ETFs tracked by Bloomberg registered outflows of 4.5 tonnes. It may be that investors are selling gold just now to offset losses in other asset classes.” Silver is now falling, as are other industrial metals, after silver had been pulled higher by rising prices for base metals last week, Commerzbank says. “Silver has more or less reversed its outperformance of gold again now, and the gold/silver ratio has climbed back to over 78,” the bank adds.

By Allen Sykora of Kitco News; asykora@kitco.com

 

BBH: Escalation of Trade Tensions Scaring Investors

Tuesday June 19, 2018 08:55

The escalation of trade tensions between the U.S. and China, which are the world's two largest economies, is scaring investors, who are liquidating equities and buying bonds, says Brown Brothers Harriman. The U.S. dollar and Japanese yen are the strongest of the major currencies, although the Swiss franc is mostly steady as benefits some from the unwinding of risk trades, analysts report. The main impetus comes from the Trump administration,” BBH notes. In response to China's retaliation for the 25% tariff on $50 billion of Chinese goods for intellectual-property rights violations, the U.S. has announced that it will put an additional 10% on $200 billion of Chinese goods, plus threatened even more if China retaliates. “China goods imports from the U.S. amount to around $130 billion,” BBH says. “China cannot play a tit-for-tat strategy unless it doubles and triples up on tariffs for existing goods.” However, BBH later adds, “The inability of China to match the escalation by the U.S. invites an asymmetrical response.  That means if China cannot win in this space that it will look for another place to express its displeasure with the U.S. action.  There are numerous areas in which the U.S. seeks China's cooperation, such as North Korea, Iran, terrorism and the South China Sea.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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