Gold prices dropped sharply on Wednesday at London’s trading session. Gold futures were down 2.69% to trade at about $1,893.20 as at the time this report was drafted.
The plunge came as appetite for risk assets recovered, thanks to a stronger greenback and real rates. The U.S dollar is up on Wednesday, continuing to rise from its two-year lows.
The present huge sell-offs recorded in the precious metal market astonished many gold traders after the per-ounce price of the yellow metal plunged below $1,900.
Here’s an Insight: Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, explained the macros, giving Gold bears such strength, as the precious metal continues its sudden downward trend. He said;
“The real pain trade gold as swollen positions got hit with the truncheon, and gold plunged the most in seven years as the bottom fell out of the markets with US Treasuries and bunds bear-steepening and real yields higher.
“Gold markets sold off picking speed exponentially as freshly minted gold longs ran for the exit.
“And in typical low liquidity August fashion, market makers were merciless pounding gold to within a hair’s breadth of $1900 as the steam roller got heading downhill when the afternoon Shanghai session saw waves of Asia banks selling en masse.”
Whether or not gold can regain its previous highs will depend on whether there is more room for downside in real yields or more dovish policies by the US Federal Reserve. Still, the possibility of squeezy price action remains in play after the US Bond market sent out the most explicit warning last week.
Crude oil prices fall on fears of global energy demand
In Thursday’s trading session, Crude oil prices fell
Crude oil prices dropped at Thursday’s trading session. This slide is attributed to recent poor E.U. economic data, and a lower-than-expected U.S. gasoline demand. Fears of a second wave of COVID-19 in emerged economies also weakened investors’ enthusiasm.
What we know: Brent oil futures fell 0.57% to $41.53 by (6:40 AM GMT) and WTI futures slid 0.78% to $39.62.
The E.U. released purchasing manager index data that heightened fears about the region’s economic recovery hopes, with the services index dropping by 50-mark, separating growth from contraction.
The U.S. Energy Information Administration (EIA) released figures on Wednesday showing a lower-than-expected draw of 1.639 million barrels for the week to Sep. 18, against a forecast 2.325 million-barrel draw. U.S. demand for gasoline was down 9% at this time last year.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in an explanatory note to Nairametrics, gave detailed insights on the bearish run prevailing in the oil market.
“Crude oil prices initially reversed their decline overnight after the Energy Information Administration reported that commercial oil stocks trended down due to a large draw in products with gasoline stocks back down to their 5-year average.
“Yet it was all for naught after US Federal Reserve Chair Jay Powell pancaked global markets with a discordant economic warning and a penetrating call out for more stimulus to congress,” Innes stated.
Oil traders are bringing crude oil price recovery to a screeching halt with nervous investors seeking out the US dollar’s safety.
Gold prices bow to rising dollar, trades below $1,900/ounce
Gold futures was down 0.89% to trade at $1,890.60 an ounce on Wednesday’s trading session.
Gold prices remained under intense pressure at the Wednesday trading session, as it went below $1,900/ounce. The slide is attributed to the rise of the U.S dollar, firing up on all cylinders on the macro that fresh COVID-19 lockdowns will be implemented in London and other parts of Europe.
What we know: At the time this report was drafted, gold futures was down 0.89% to trade at $1,890.60 an ounce.
Why the yellow metal is falling now
Rising COVID-19 caseloads in emerged markets have distorted investment strategies of global investors as the world’s economic recovery seems to be fragile, driving investors into dollars, which has weighed on the bullion-asset.
On top of that, gold traders also have unwound some of their gold holdings as a part of this week’s equity-market sell-offs, which added to the pressures around precious metals.
Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note, spoke on the selling pressure that the yellow metal is presently facing, as it seems the bears are having the upper hand.
“Gold has fallen out of favor; still, the downside may also be limited due to low yields and geopolitical and trade risks that are likely to provide a price floor.
“The lack of a bounce after Monday’s drop is not encouraging. While gold does not look persuasive, there is a limit to how low it is likely to fall – at least ahead of a highly contentious US election, a climate of highly charged geopolitical risks, and renewed COVID-19 concerns.
“The precious metal might continue to struggle to make new highs.”
Crude oil prices drop again after losing 4% on Monday
Oil benchmarks fell around 4% on Monday following rising concerns of increased coronavirus cases.
Crude oil prices drifted lower at the later part of Asia’s trading session on Tuesday, as Tropical Storm Beta in the Gulf of Mexico weakened.
What we know: Brent oil futures were down by 0.31% to $41.31 at the time this report was drafted, and WTI futures fell by 0.23% to $39.22.
Both oil benchmarks fell around 4% on Monday, hit by rising concerns that an increase in coronavirus cases in major markets could spur fresh lockdowns and hurt demand.
Oil prices are falling again amid Tropical Storm Beta reduced in power in the Gulf of Mexico, allaying fears of an extended shutdown that began in the previous week with Hurricane Sally.
In a note to Nairametrics, Stephen Innes, Chief Global Market Strategist at AxiCorp, spoke on the macros disrupting the price of hydrocarbon.
“In line with broader markets, oil prices were hammered lower overnight as the growth assets buckled amid lockdown fears in Europe and the UK.
There continues to be concern around the effects on demand of the resurgence in Covid-19 cases globally as countries have to counterbalance the economic and health issues in getting back to work. The second half of 2020 was always going to reflect this price see-saw.
While mother nature is doing its part as traders focus on the hurricane season in the US, OPEC+ cuts seem to be tightening the market.”
However, the COVID-19 crisis continues to deepen with growing concerns about global energy demand arising from the latest data on the spread of the virus in major world economies such as the U.K.