Precious Metals Trade Upwards On Equity Rout Amid Subdued USD Ahead of US FOMC Update

Gold prices were steady having hit weekly high earlier today, ahead of a key U.S. Federal Reserve meeting, as speculation that signs of economic turbulence may prompt the central bank to put brakes soon on its monetary tightening cycle kept the dollar under pressure.

The Federal Open Market Committee (FOMC) is widely expected to raise interest rates at its two-day meeting starting later in the day, but the focus will be on its outlook for 2019 as macro data from the US so far hints at a possible pause in a rate hike for 2019 over concerns of an economic slowdown. If rate hike for 2019 is put on pause it will greatly affect the outlook of US Greenback in medium to long-term boosting demand for the yellow metal as a preferred safe haven asset.

US Crude Inventory Data Continues To Weigh Crude Oil Price Action

As of writing this article, spot gold XAU/USD is currently trading at $1248.66 per ounce up by 0.22% on the day, while US gold futures GCcv1 is trading at $1252.50 per ounce up by 0.05% on the day. The dollar was fragile in Asian trading session pressured by weak US macroeconomic outcome and economic growth concerns. Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar which makes dollar-denominated precious metals highly attractive in eyes of investors. Though upside potential for gold prices faces impediment from a vigorous dollar, looming economic uncertainties are expected to provide optimal conditions for safe-haven assets beyond 2018.

Precious metals also receive support from a bearish rout in global equities since the trading session began for the week. Spot Silver XAG/USD is currently trading at $14.70 per ounce up by 0.30% on the day. Oil prices dropped over 1 percent on Tuesday, falling for a third straight session, as reports of inventory build and forecasts of record shale output in the United States, currently, the world’s biggest producer, stoked worries about oversupply.

Concerns around future oil demand amid weakening global economic growth and doubts over the impact of planned production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) were also pressuring prices. Meanwhile, oil production from seven major U.S. shale basins is expected to climb to 8.03 million barrels per day (bpd) by the end of the year for the first time as per data from U.S. EIA released yesterday and such an increase will most likely defuse any attempts to cut production and output from OPEC end thereby adding more bearish pressure to crude oil market. Spot Crude WTI/USD is currently trading at $49.06 per barrel down by 0.18% on the day.