Gold prices remained stagnant during the morning session with a slight drop today in the international market over the absence of any price driving events. The benchmark gold spot traded in a narrow range of US$1272.57 to US$1275.34 during the day’s session.
The prices are losing lustre from past six trading sessions amid improvement in dollar prices and the United States Federal Reserve optimism over the domestic economic conditions.
Improved economic figures in the United States jolted the bullion market and threw the risk-free asset under the bus. The Unemployment Claims in the United States declined overall in May 2019 so far, which in turn, exerted pressure on gold prices.
On the other hand, the re-escalation of the U.S-China trade war seems to be less bothering the Federal Reserve members, who are optimistic about the United States growth scenario. A per the recent comments from the FED members, the inflation and unemployment status is going as targeted.
The Federal Reserve is still unclear about the interest rate environment, which is keeping the gold prices at bay, and market participants are waiting for further inputs from the global market to instigate major actions in the market.
The ambiguity over the future interest rate environment and the absence of any visible outcome from the United States and China bilateral disagreement are also keeping the prices in the narrow range.
The dollar prices are extending its rally and in turn, suppressing the yellow metal prices in the global market. The market and speculators prefer dollar as a hedge against the U.S-China trade tiff, which in turn is putting down the gold status of a safe-heaven.
Although few analysts and market participants believe that the rally in the dollar is a near end, and the dire impact of the trade tiff would soon be visible in the global market in terms of declining economic figures, which could give gold prices a cushion shortly.
To reckon the gold prices further, the market participants should keep a close eye on the dollar movement along with the impact of U.S-China trade war on the global economic conditions and trade scenario.
On the data front, the investors should monitor the upcoming unemployment figures in the United States, which is expected to inch up slightly by the market participants. Besdies, the figures for durable goods and core durable goods are also pending and should be monitored.
The recent plunge in the bullion market marked a decline in both the prices of silver and gold; however, the industrial silver lost value significantly in the market over the trade dispute with gold prices managing its leverage over the silver.
Source: Thomson Reuters; XAU/XAG Daily Chart
The Gold-Silver ratio0 (XAU/XAG) rose substantially during the month so far from the level of 85.77 (Day’s low on 1st May 2019) to the level of 89.04 (Day’s high on 17th May 2019). However, the past six days fall in the gold prices, and consolidation in silver prices marked a slight decline in the ratio, and it dropped from its recent high of 89.04 to the present level of 88.18 (as on 22nd May 2019 AEST 7:24 PM).
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