Precious metal prices fall while oil rises in June 2018

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Southern Times Writer

The month of June saw the prices for precious metals taking a downward trend because of global economic uncertainties. 

According to Focus Economics, precious metals prices fell 1.6 percent on a month-on-month basis in June (May -2.2 percent month-on-month).

The fall in the precious metal prices is a result of a series of interest rate increases in the US economy as well as the strengthening of the US dollar.

During the month of June, US Federal Reserve decided to hike its rates twice. The increased interest rates resulted in the wearing away of the lucrativeness of precious metals as safe heaven assets.

In addition to the hike is the unceasing trade war between major players which continues to derail demand for key industrial commodities, including palladium, platinum and silver. The Focus Economics report pointed out that the recent implementation of tariffs on US$34 billion worth of Chinese goods imported to the US and the immediate retaliation by China on 6 July are ladders towards further economic uncertainty.

“Looking ahead, prices for precious metals will be determined by geopolitical risks, although the effects will have an opposite impact on the commodities. While an uncertain global outlook will notably support gold prices, prospects of weaker global growth will dampen demand for industrial commodities.

"Elevated geopolitical risks, healthy purchases of jewellery and robust industrial demand are expected to lead precious metal prices to rise 2.4% year-on-year in Q4 2018. The Focus Economics panel sees prices increasing at a broadly similar pace of 2.3% year-on-year in Q4 2019,” stated the report.

On a current performance analysis starting with the gold price, the price of gold decreased 3.05 US$ an ounce or 0.25 percent  to $1,226.05 on Wednesday July 18 from $1,227.12 in the previous trading session. After reaching its lowest level in the previous week the yellow metal has started to show signs of life.

According to FX empire, analysts stated that  last week’s spike move suggests that possibly Friday 13 July to $1236.20, slightly above the July 7, 2017 bottom at $1230.70, was an indication of fatigue, and the market may be gearing up for a short-covering rally. The gold prices initially rallied during Monday’s session but ran into trouble around the $1245 level, which was offering short-term resistance and pulled back.

Moving forward, the market was likely to witness some amount of buying interest from the $1238 level. In the long term, the market was likely to be under pressure as fears of strengthening trade wars, rising interest rate in the US as well as the US$ gains.

Silver price started the month of June on the high with prices ranging between $16.5 to $16.2 the precious metal witnessed a severe fall on 2 July to $15 .8 and was recovering from the fall. The silver prices initially rallied during Monday 16 July session but gave in all the gains reaching down to the $15.75 level. On Wednesday July 18 silver prices decreased 0.09 US$ an ounce  or 0.55 percent  to $15.47 from $15.55 in the previous trading session. Experts forecast that the market is likely to break towards the $15.50 level as the market is struggling to move higher from that point. Given the current situation the $16 level seems to be resistive and it may be problematic for the market to go above in the set prices. 

Oil prices pushed higher in June due to global demand and US efforts to shut out Iranian output using sanctions. The month of June saw oil price rising from $66 to a high of $74. The month of June saw global oil prices averaging $74 a barrel which is $3  barrel lower than in May. On Monday 15 July crude oil prices broke the $70 support level session, reaching towards the $68 level. Crude oil further decreased 0.50 USD/BBL or 0.73 percent to $67.62 on Wednesday July 18 from $68.08 in the previous trading session.

The current fall of the price was a result of the recent Saudi Arabia decision to release more oil supplies to the market, in addition the strengthening of the USD was keeping the market under pressure. Analysts forecast that  crude oil prices  will average $73 a barrel in the second half of 2018 and $69/b in 2019.

 

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