— This is the script of CNBC's news report for China's CCTV on August 16, 2018, Thursday.
The recent slump in precious metal was indeed affected by risk aversion and firmed dollars. Especially in the last few trading days, Turkey's currency crisis brought turbulence in emerging market, causing the currencies in some emerging countries went weak and prompting USD hit a record high in 1 year. Among them, increasing risks exposure in Europe banking industry weighing on the EURO, and supporting USD. We know that, because some commodities are denominated by USD, if USD appreciates, a drop will be seen in commodity price, so, those products have an inverse correlation with USD.
In the last trading day, USD index that measures the dollar against six major currencies hit 96.984 in intraday, which is the peak since June, 2017, but fell later, dropping 0.04% in the last session, closing at 96.696.
With USD continue to go strong, precious metal dives; gold eased more than 1%, recording a history low since Jan, 2017. Meanwhile, silver was off more than 4%, platinum waned over 5%, and palladium lost 7%.
Even though gold is a safe heaven asset, but risk aversion didn't benefit the gold price. After turkey experienced turbulence, investors converted to foreign exchange, such as JPY and USD, rather than gold assets. Some analysts believe, now USD still keeps a strong position as a hedge approach, bringing a headwind to the future of gold in fundamentals. While at the tech front, gold price also faces a down trend, and USD1150 will be the next support point. So far, precious metal, such as gold, may not have a big bounce.
In addition to precious metal, another noteworthy commodity category is petroleum. According to the latest data from the U.S. energy information administration, U.S. national commercial crude oil inventories rose by 6.8 million barrels till 10, Aug, and that is beyond the expectation. Before that, the market thought, inventories will decrease, so this data drove down the international crude oil price.
Till the closing overnight, WTI light crude oil closed at USD65.01/barrel, with a drop of 3.03%. London Brent lost 2.35%, closing at USD 70.76/barrel.
Making international crude oil price down to a new low in 2 months, we will keep an eye on this issue.