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Crude Oil Down, Precious Metals Rise Despite Risk Appetite

September 14, 2020 at 14:38 by Vladimir Vyun

Crude oil logged modest losses, while gold and silver demonstrated a strong rally today. That is despite risk appetite prevailing on markets, which encouraged investors to favor riskier assets, not safer ones.

Market analysts explained the rally of precious metals by the weakness of the US dollar. Lately, traders preferred the US currency over gold as a refuge, meaning that the greenback is now somewhat more vulnerable to the positive market sentiment. On top of that, the Federal Reserve will make a monetary policy announcement this week, and market participants expect a dovish statement from the US central bank.

As for crude, its losses could be explained by concerns about demand following the COVID-19 pandemic. While the global economy is currently recovering, economists are worried about how sustainable the recovery is, especially if the second wave of the coronavirus pandemic occurs after the summer’s end. The Organization of Petroleum Exporting Countries forecast that the global oil consumption will drop by 9.46 million barrels per day in 2020, more than in the previous month’s estimate, which has promised a 9.06 million bdp drop. In the near term, the prospects of renewed supply from Libya was also weighing on crude. The US Embassy in Libya reported that Libyan National Army commander Khalifa Haftar promised to lift a month-long blockade of Libyan oil facilities.

The silver lining for crude oil can be tropical storm Sally, which is moving to the Gulf of Mexico and is expected to turn into a hurricane. It can explain why the losses in crude oil futures were limited.

Futures for delivery of gold in December rallied $19.5 (1%) to $1,967.4 per troy ounce as of 14:35 GMT on COMEX today. Silver jumped by $0.49 (1.82%) to $27.35 per ounce. WTI crude for delivery in October fell by $0.07 (0.19%) to $37.26 per barrel on NYMEX. November Brent crude declined by $0.09 (0.23%) to $39.74 per barrel on ICE.

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