Precious metals are lower in Asian and European trading as broad-based risk aversion prompts safe-haven flows to the greenback

London (Feb 18)  Gold is retreating from its highest level in a more than two months as a broad-based US dollar rally appears to be undermining the precious metals space. Meanwhile crude oil has failed to break through notable resistance at $101.40 and is treading water ahead of the US trading session.

US Dollar Recovers Ground On Broad-Based Risk Aversion

The greenback continues to recover lost ground which is likely weighed on silver and gold. With broad-based risk aversion characterising early European trading, the reserve currency appears to be once again benefiting from safe-haven flows.

A possible reason for the declines in risk assets may lie with reports from newswires that Chinese monetary authorities have reduced liquidity in domestic money markets. Profit-taking amongst investors is also a likely contributor, given the string of consecutive gains for instruments like the SPX500 over the past two weeks.

Reversal In Risk Trends May Bode Ill For Precious Metals

Risk appetite will continue to be important driver to monitor over the coming week given its influence on the USD and hence gold and silver. Given the early indications of a potential reversal in risk assets, a more meaningful dampening of investor sentiment would likely bode ill for the precious metals space, and may additionally weigh on crude oil as a growth-sensitive commodity.

In early trading spot gold was down nearly $9 to $1313, while spot silver lost 32 cents to$21.34.

(Source: Inside Futures)