Precious Metals Decline As US Greenback Gained Strength Ahead of FOMC Update

Gold prices were steady on Friday supported by the uncertainty around the Federal Reserve’s policy outlook for next year but the metal was on track to mark its biggest weekly decline in five weeks, as a firmer dollar weighed on the sentiment. While the yellow metal has lost its bullish mojo due to revival of demand for USD ahead of FOMC rate hike meet, the pair continues to hold steady above the 200 hour moving average it hit yesterday as bearish comments from ECB president Mario Draghi’s speech yesterday where he expressed caution of risk for economic growth skewed to downside and bearish price action in Asian markets inspired safe haven demand for gold.

Gold outlook positive as Fed is likely to pause rate hikes for 2019

There are not many immediate risks at this point of time, therefore some people are holding on to their positions in gold and not liquidating. Market sentiment towards zero-yielding gold is at risk of souring ahead of the Fed meeting next week where interest rates are expected to be hiked. However, with the Fed potentially taking a pause on rate hikes next year, gold remains somewhat supported. The risk of a U.S. recession in the next two years has risen to 40 percent, according to a Reuters poll of economists who also found a significant shift in expectations toward fewer Fed interest rate rises next year which paint positive picture for long term outlook of gold. As of writing this article, spot gold XAUUSD is currently trading at $1238.27 per ounce down by 0.30% on the day while US gold futures GCcv1is trading at $1242.50 per ounce down by 0.39% on the day.

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Spot Silver XAGUSD is currently trading at $4.63 per ounce down by 0.84% on the day. Oil prices fell on Friday as investors cashed in gains of more than 2 percent made during the previous session on concerns demand may slump amid slowing economic growth, though there are still expectations for producer supply cuts to support prices. China, the world’s second-largest economy and the largest crude importer, on Friday reported some of the slowest retail sales and industrial output growth in years for November, highlighting the risks of the country’s trade dispute with the United States. Oil refinery throughput in November in China fell from October, which was the second-highest month on record, suggesting an easing in Chinese oil demand, though runs were 2.9 percent higher than a year earlier. However, some support for prices remains because of the output cuts agreed between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers including Russia. That could create a supply deficit by the second quarter of next year, the International Energy Agency said on Thursday. Spot US Crude WTIUSD is currently trading at $52.34 per barrel down by 0.83% on the day.

This article was originally posted on FX Empire

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