It has been another cruel trading week for Gold despite global trade tensions denting risk appetite.
A sense of caution continues to linger in the air amid the confusion and uncertainty, but investors seem to be avoiding safe-haven Gold. The driving force behind the yellow metal’s weakness continues to be based around a broadly stronger Dollar. With the Greenback supported by expectations of higher US interest rates this year, zero-yielding Gold is poised for further punishment. Market players may exploit the current technical rebound to push prices lower.
In regards to the technical picture, Gold remains bearish on the daily and weekly charts. Sustained weakness below $1250 could encourage a decline towards $1241.
Oil supported by geopolitical risk factors
Oil prices are poised to conclude the week on a positive note amid global supply outages.
Supply disruptions in Canada, Libya and Venezuela have supported oil bulls with WTI Crude venturing towards $73.61 as of writing. With geopolitical tensions likely to fan concerns over supply disruptions, oil prices have scope to extend gains in the short term. From a technical standpoint, WTI Crude is firmly bullish on the daily charts. A solid weekly close above $73.00 could inspire an incline higher towards $75.00.
Markets driven by trade war fears
Uncertainty and confusion over global trade developments have left investors on edge.
Donald Trump’s threat at the start of the trading week to ban Chinese companies from investing in US technology firms simply sparked risk aversion and roiled financial markets. However, Trump later softened his stance on Wednesday which came as a breath of fresh air for markets. However, White House economic advisor Larry Kudlow was quick to squash the optimism when he stated that the US administration’s latest approach towards China shouldn’t be characterised as a retreat.
Although there was an EU economic summit and key economic data releases from the United States this week, markets were clearly more concerned with the global trade developments.
Speaking of the United States, first quarter economic growth disappointed by printing at 2.0%, which was below the 2.2% market expectations. Although the Dollar depreciated following the release, the overall outlook remains firmly bullish. With expectations of higher US interest rates elevated, investors may exploit the Dollar correction as an opportunity to elevate prices higher.
While trade tensions are likely to remain in focus over the coming week, much attention will be directed towards the US jobs report. This will be a very significant release which could impact global stocks, commodities, and emerging markets. A strong NFP coupled with signs of accelerating wage growth may heighten expectations over the Fed raising interest rates faster than expected this year. Alternatively, a disappointing jobs report could weaken the Dollar and weigh on US rate hike expectations – ultimately supporting emerging market currencies, stock markets, and Gold.
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