No Hope For Gold? | Iran and Oil Supply Under Focus


Golds weakness against the dollar seems to continue. The expectations of gold declining are still in the air while factors supporting the greenback are present. The non-farm data coming better than expected gives incentive to the fed to increase interest rates in full force. Moreover, the rate hikes have been scheduled to take place this month where it is definite that it will be happening. This will push gold a lot further down while it falls victim to the dollar. Non-yielding bullion shows no advantage to investors in times of increased interest rates.
 


Trumps plans to impose tariffs on all Chinese imports has allowed the dollar to gain strength from a secondary source. The consequences of this are grave for gold. As, while the dollar sees increases on a modestly continuous basis it makes the precious metal more expensive for investors that do not hold the greenback as a currency. More individuals invest into the dollar because of these trade tariffs with belief that the U.S. has the least to lose in a trade war.

However, China has not yet retaliated to the extents that the opposing party has. Therefore, it is all but a waiting game, if the trade war escalates to the point where both parties make strong drastic decisions then we may even see a slowdown in economic growth. This would affect everything. 

The precious metal has seen declines of approximately 12.6 percent from a high in April. This is because in current circumstances gold has lost sight of being seen as a safe-haven while dollar takes the lead.
 

Oil prices continue to increase while U.S. seeks to cover losses in supply. Moreover, the fatalities of a decline in supply could continue to rise prices if a solution is not found. On the other hand, it seems the U.S. understands this. Therefore, Russia, U.S. and Saudi Arabia being the three biggest oil producers by a mile off are believed to be attempting to reimburse the supply loss from Iran. Additionally, the oil produced by all 3 countries together has rose by 3.8 million barrels per day since September 2014.

Whereas, Iran was only able to reach a peak of 3 million barrels per day in the past 3 years. In addition, this brings some peace of mind, as it shows that together the 3 countries united together may be able to fill in the gaps that Iran once claimed. However, the size of positive impact from this solution will only unfold in November when the sanctions are in full force.

It has been known that Washington has begun to pressurize South Korea and Japan to cut off ties with Iran which will in turn lead the two countries to result to imports of oil from the U.S. Moreover, India had previously decided to resume trade. However, as of now it is believed that they are cooperating with the U.S..
 

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