Gold (XAU/USD) and oil prices have kicked off this week on a bearish trend as the coronavirus continues to cause a huge negative impact on global economics but the U.S dollar has remained strong but the performances are connected.
The connection mainly comes from crude oil performance which was characterized by a massive crash on Monday as prices dropped below $1 per gallon. In fact, things go so extreme for the industry that the price dropped to-$37.63, which means that oil producers were willing to pay buyers to take the excess oil.
WTI Oil demonstrated bearish momentum for the past one week and the trend has become more extreme this week as the producers were forced to lower prices to the negatives per gallon. WTI Oil dropped from the low $20s on Monday’s trading session and has been trading below $10 for the better part of Tuesday morning’s trading session.
The crashing oil prices have fueled more caution among investors, thus encouraging them to shift more towards safe havens such as the U.S dollar. This has in turn also affected the price of gold which has also been bearish for the better part of Tuesday. The price of Gold dropped from Tuesday’s high at around 1,697.96 to a low of 1661.18 as of the time of this press. This drop is likely because investors are shifting more towards the U.S dollar which has been experiencing more demand as a safe haven currency.
The poor performance in oil prices is mainly caused by the lack of demand for the commodity because of the coronavirus pandemic which has also hugely affected industries and the overall global economy. Some countries have been considering reopening their economies in an attempt to boost their economies and fuel recovery. Economic recovery will likely help to restore oil prices but there is still no cure for the coronavirus and the main goal of the lockdown measures was to curb the spread. Other efforts from the U.S government and key oil industry players have so far done little to aid oil price recovery.