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Gold & Crude Oil Lose Part of Risk Premium

June 17, 2014 at 4:49 by Vladimir Vyun

Gold and crude oil retreated today on speculations that the previous rally was excessive. The commodities rallied last week due to escalating tensions in Iraq. Crude gained on concerns about potential supply disruptions, while gold profited from its role as a safe haven. Without any major changes to the situation over the weekend, investors feel less need for safety, though this does not mean that the risk premium has gone away completely.

The major event this week is the policy meeting of the Federal Reserve. It is expected that the US central bank will continue to reduce stimulus at the same pace as in the previous meetings, demonstrating confidence in US economic recovery. Such prospects are positive for crude oil but negative for gold.

Gold for delivery in August dropped $6.9 (0.54 percent) to $1,268.4 per troy ounce as of 4:42 GMT on COMEX today. July futures for WTI crude lost $0.27 (0.25 percent) to $106.63 per barrel on NYMEX. August contract for Brent grade of oil fell $0.32 (0.28 percent) to $112.62 on ICE.

If you have any questions and comments on the commodities today, use the form below to reply.

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