Doha Oil Negotiations and Domestic Data Reports Boost Gold

23 Apr

Doha Oil Negotiations and Domestic Data Reports Boost Gold

Stronger Dollar-Eurozone Fears

Gold Price Rises as Oil Price Falls after Doha Oil Negotiations Derail on Iranian-Saudi Tension

Doha Oil Rig

The oil market endured a tense week as OPEC countries met for negotiations in Doha that ultimately broke down, causing oil prices to plummet. Rising tensions between regional rivals Saudi Arabia and Iran over output levels led to the demise of the talks in Qatar’s capital city. Iran, who has been increasing output since lifted sanctions in January, refused to sign up for the output-freeze that was proposed for all OPEC countries. After the Iranian refusal to play along, Saudi Arabia, the world’s leading oil producer, stated that they would likely increase output in conjunction with the Iranians as the freeze would only be effective if everyone signed up to it. Investors had been betting on an oil deal being reached, so when the crude oil price fell nearly 5%, demand for safe haven gold went up, lifting gold prices.

Why this matters to precious metals investors:
Iran and Saudi Arabia’s rivalry extends far past oil. The two countries’ religious-political feud derives from a centuries-old ideological division that still influences diplomacy in the region. These recent negotiation breakdowns are one of many indicators of increased volatility in the Gulf States. This kind of instability can be a strong driver for gold prices. As oil prices fell on Tuesday, investors shifted their focus towards gold as the metal offers more security. Gold, unlike oil, has intrinsic value that makes it more desirable in the face of regional threats to global security.


Silver Hits 11 Month High; Up More Than Gold in 2016

Silver Hits 11 month High

Silver has been building on its gains from last week and shot up 4.5% on Tuesday. So far this year silver is up 22% while gold is up 18%. Some of the reasons for silver’s rally are the same monetary policies driving gold and a Chinese economy that is gaining back some of its strength and putting increased demand on the metal. Silver is sometimes called “the poor man’s gold” for its relatively cheap price, but performances like this prove it can stand apart as a sound, and sometimes more lucrative, investment. Some experts are calling the white metal the best investment so far of 2016.

Why this matters to precious metals investors:
Silver generally trades against gold at 60 ounces to 1. Before it went through this corrective rally, it had seen disparity as great as 80 to 1 and is now returning to its historic parity. Silver’s strong performance all year is proving its returned stability. Now is a prime time to diversify a precious metals portfolio with silver as it continues its upward climb.

Precious Metals Soar as Dollar Slumps After U.S. Data

Weaker Dollar after US Data

This week’s release of U.S. economic and employment data was less than positive, which helped drive price increases in gold and silver. The U.S. housing market was hit harder than expected and the dollar slumped against other basket currencies while silver hit a 10-month high, gold rose 2% and platinum reached a 6-month high Tuesday. With a cautions Fed policy on interest rates, analysts predict the precious metals market to hold onto its gains into the next quarter.

Why this matters to precious metals investors:
The U.S. economy is becoming sluggish and interest-bearing assets are suffering, which is lifting the price of gold. The dollar is performing at its lowest in over six months. Investors are flocking to safe haven metals rather than a risky stock market.

China Starts Gold Fixing in Bid to Expand Global Market Sway

China Starts Gold Fixing

China is continuing to send ripples through the gold market. The world’s second largest economy is showing a proclivity towards having a large holding in gold. China is now the world’s largest consumer of gold and purchase of coins and bars is on the rise. The Chinese central bank is increasing its bullion holdings as it moves to diversify its foreign-exchange reserves. On Tuesday China began a twice-daily price fixing in a bid to increase its sway in the global market and establish a regional benchmark that could potentially rival the benchmark set in London twice a day. Having more sway in the gold market would help a Chinese strategy to establish the yuan’s expanded international use. Experts are saying this is an important development to watch as it could mean the start of increased use of gold in the Chinese monetary system and China becoming a key player in the gold market.

Why this matters to precious metals investors:
Over the next decade as China’s economy expands, it will likely overtake the U.S. as the world’s largest economy. The ascendant power’s focus on gold shows the metal’s long-term value and desirability. The Asian superpower has decided to prioritize the bullion market as an international market to have significant sway over. Because gold safeguards wealth against economic turmoil and global instability, having such a stake would ensure Chinese economic power in the future.

Here are some articles from the web discussing the topics in this week’s post:

Gold Price Rises as Oil Price Falls after Doha Negotiations Derail on Iranian-Saudi Tension
Read Here

Precious Metals Soar as Dollar Slumps after U.S. Data
Read Here

Silver Hits 11 Month High; Up More than Gold in 2016
Read Here

China Starts Gold Fixing in Bid to Expand Global Market Sway
Read Here


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