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Commodities

Gold Price Rebounds Sharply as Stock Rout Boosts Haven Demand

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Gold rebounded sharply on Thursday, as traders returned to the relative safety of precious metals following the worst stock rout since February. U.S. equity markets appear to have stabilized by mid-morning, though downside pressure is likely to persist.

Gold Regains $1,200

Precious metals rose across the board Thursday, with gold futures returning above $1,200 for the third time in the last four weeks. December gold, the most actively traded futures contract, jumped $24.20, or 2%, to $1,217.70 a troy ounce on the Comex division of the New York Mercantile Exchange. That’s the highest since August.

Comex silver futures notched gains of 21 cents, or 1.5%, to trade at $14.54 a troy ounce.

The gold/silver ratio that is used by investors to determine when to buy and sell precious metals widened to 83.84 on Thursday. This essentially means that 83.84 ounces of silver at spot price are needed to purchase one ounce of gold. The ratio is down 1.5% over the past month but has risen by more than 5% over 60 days.

Industrial metals were also trading higher on Thursday, with copper futures climbing $1.45, or 0.5%, to $279.50 a pound.

The U.S. dollar, which often trades inversely with precious metals, declined 0.3% against a basket of major currencies. The dollar index is currently valued at 95.25.

China Leads Stock-Market Selloff

A sharp and sudden selloff on Wall Street Wednesday ignited a panic sale in global markets, with all major indexes in Europe and Asia reporting heavy declines. Asian markets were the heaviest hit, with Chinese stocks shouldering massive losses.

The mainland’s CSI 300 Index plunged 4.8% to 3,124.11, the lowest in two-and-a-half years. China’s benchmark Shanghai Composite Index sold off 5.2% to close at 2,583.46.

Chinese markets have been under heavy selling pressure since Monday as traders returned from Golden Week celebrations to find dismal economic data, rising U.S. government bond yields and what many believe is an ineffective response from the central bank to ease capital restrictions.

U.S. President Donald Trump and Chinese counterpart Xi Jinping are planning to meet at the upcoming Group of 20 summit in Buenos Aires, Argentina at the end of November. Both countries are locked in a bitter trade dispute, with the U.S. levying tariffs on some $250 billion in Chinese imports. Negotiators had planned more fruitful dialogue in September before the Trump administration moved ahead with new tariffs.

The International Monetary Fund (IMF) has warned that a prolonged trade dispute between the superpowers threatens to undermine global economic stability. The Washington-based lending institution downgraded its 2019 outlook for both countries and the global economy as a whole.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 643 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Commodities

Weak Growth Outlook, Iran Sanctions Bring Volatility to Oil Markets

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Oil prices were under pressure on Wednesday, as traders grappled with the International Monetary Fund’s murky outlook on global economic growth.

Oil Price Update

Crude prices were down across the board midweek, with U.S. and international futures benchmark trekking lower. The U.S. West Texas Intermediate (WTI) benchmark fell $1.67, or 2.2%, to $73.29 a barrel on the New York Mercantile Exchange. Brent crude was down $1.62, or 1.9%, to $83.38 a barrel.

Despite the recent drop, prices will likely rebound in the near term as the Gulf of Mexico braces for Hurricane Michael, which is currently a Category 4 storm. Current forecasts suggest that the storm will miss the main production areas in the region, though major disruptions to economic activity are expected.

IMF Downgrades Global Growth Outlook

U.S.-China trade tensions and rising import duties are beginning to affect the global economy, according to the International Monetary Fund. The Washington-based lending institution this week lowered its outlook on global economic growth in the next few years, citing several risks to commerce.

The United States and China – the world’s two largest economies – saw their growth outlook slashed next year. IMF officials now expect the U.S. economy to expand 2.5% next year, down 0.2 percentage point from the previous estimate. Meanwhile, China’s GDP growth is forecast to slow to 6.2% in 2019 from 6.6% this year. That also reflects a 0.2 percentage point drop from the prior estimate.

“The impacts of trade policy and uncertainty are becoming evident at the macroeconomic level, while anecdotal evidence accumulates on the resulting harm to companies,” the IMF said in its latest outlook. “An intensification of trade tensions, and the associated rise in policy uncertainty, could dent business and financial market sentiment, trigger financial market volatility, and slow investment and trade.”

The fund now projects global growth to be 3.7% in 2019, down from 3.9%. Officials also predicted a downward trend in 2020 and beyond.

Extreme Volatility

BP’s chief executive has warned of “extreme volatility” in oil prices emanating from the resumption of U.S. sanctions on Iran. In a recent interview with CNBC, Bob Dudley said his firm is preparing for “45 days of extreme volatility” in the market where prices can go either way.

Dudley’s comments reflect wider concerns over the impact of Iran sanctions on global crude supplies. Exports from the Islamic Republic declined to 1.1 million barrels in the first week of October, down from 1.6 million in September, according to industry sources. Iran shipped as much as 2.6 million barrels per day in April.  Sanctions against the country’s oil industry will come into force Nov. 4, 2018.

Analysts warn that U.S. sanctions against Tehran could keep oil prices artificially high. Crude is expected to stay above $65 a barrel in the intermediate term and possibly returning to $100 by next year.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 643 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Commodities

Precious Metals Plunge as Dollar Approaches Two-Month High

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Precious metals declined sharply on Monday, giving back some of last week’s rapid gains as rising bond yields triggered renewed upside in the U.S. dollar.

Gold, Silver Slump

Precious metals prices were down across the board at the start of the week, as commodities traded inversely with the dollar. Gold for December settlement, the most actively traded futures contract, fell $18.20, or 1.5%, to $1,187.40 a troy ounce on the Comex division of the New York Mercantile Exchange.

Silver’s declines were much more severe percentage-wise. The grey metal plunged 34 cents, or 2.4%, to $14.31 a troy ounce.

Gold’s premium over silver has declined 2.6% over the past 30 days to 82.45 ounces, according to Goldprice.org. Over the past 60 days, gold’s premium has increased 4.6%. This basically means that one ounce of gold is worth 82.45 ounces of the grey metal.

Platinum prices were also down on Monday. The spot value declined $8.42, or 1%, to $814.11 a troy ounce.

Copper slipped 60 cents, or 0.2%, to $275.70 a pound.

Dollar Gains

The U.S. dollar was riding new highs on Monday as the recent bond-market selloff triggered a sharp rise in Treasury yields. The dollar index (DXY) reached a high of 96.03, its best level since mid-August. At press time, DXY was up 0.3% at 95.88.

A rising DXY figure indicates a stronger U.S. dollar versus a basket of six major currencies, which includes the euro, yen, pound, franc, Canadian dollar and Swedish krona.

A combination of factors has contributed to the recent surge in bond yields and the commensurate gain in the dollar. A stronger domestic economy, highlighted by the recent drop in unemployment, has heightened expectations for a faster tightening cycle by the Federal Reserve. Recent turmoil in Italy has also contributed to the growing appeal of the dollar as a reserve currency. Interestingly, Italy’s budget crisis pushed investors into the safety of gold last week.

When yields rise in the bond market, the U.S. government must pay higher interest rates to attract new buyers. This usually increases demand for U.S. Treasuries, thereby leading to a rise in the dollar.

For commodities priced in dollars, a stronger greenback serves as a disincentive for holders of foreign currencies. If this relationship holds, precious metals like gold and silver could experience further weakness as the Federal Reserve continues normalizing interest rates. The Fed hiked rates last month for the third time this year and is expected to raise them again in December.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 643 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Commodities

Gold Price Surges as Italy Scares Global Markets

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The value of gold spiked on Tuesday after Italy unveiled that its 2019 budget will overshoot European Union (EU) guidelines, setting the stage for a clash between Rome and Brussels.

Gold Returns Above $1,200

Investors cut ties to riskier assets and entered the relative safety of gold on Tuesday, triggering a sharp increase in both the spot price and in the futures market. Gold for December delivery, the most actively traded futures contract, rose $18.90, or 1.6%, to $1,210.20 a troy ounce on the Comex division of the New York Mercantile Exchange.

Silver futures for the same month climbed 39 cents, or 2.7%, to $14.90 a troy ounce.

Gold’s breakout follows months of choppy trading conditions for the yellow metal. Since bottoming at $1,184.00 a troy ounce in mid-August, gold prices have fluctuated between $1,187.00 and $1,216.00 an ounce.

Much of the downward pressure in recent months can be attributed to a stronger U.S. dollar. Commodities such as gold are priced in greenbacks, which makes any appreciation in the U.S. currency a disincentive for holders of other currencies. However, gold and the dollar traded in the same direction on Tuesday. The DXY dollar index was up 0.2% to 95.50, its highest since Aug. 23.

Italy Triggers Global Tension

Investors switched to risk-off mode this week after Italy announced that its forthcoming budget will run at 2.4% of gross domestic product (GDP), exceeding the maximum threshold set by the EU. The expected deficit in Rome’s 2019 budget not only triggered a negative market reaction, it prompted some angry comments from European institutions. Italy has until Oct. 15 to submit its proposed budget to the European Commission.

Italy currently holds the second-highest debt in the 19-member Eurozone at €2.3 trillion ($2.67 trillion).

On Monday, Italy’s Deputy Prime Minister Luigi Di Maio accused the EU of “playing terrorism with the markets” by criticizing the new government’s budget. The populist coalition has since threatened to leave the euro, triggering renewed anxiety in the market.

Claudio Borghi, who heads economic policy for the ruling Lega party, implied on Tuesday that Italy’s days in the euro bloc could be numbered.

“I am truly convinced that Italy would solve most of its problems if it had its own currency,” Borghi said in a radio interview, as reported by CNBC and Reuters.

Borghi’s comments triggered a spike in bond yields. The yield on Italy’s 10-year bond hit 3.40% early Tuesday, the highest in four-and-a-half years.

Italian share prices and the rest of Europe’s main indexes were also in the red. The Eurozone Stoxx 50 Pr settled down 0.8% on Tuesday.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 643 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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