On Monday, as traders assessed the global stock market crash and the escalation of tensions in the Middle East, gold prices fluctuated lower, falling below $2,390/ounce as of press time, the first time since July 30, a 2% drop in the day, and more than $68 from the intraday high. Spot silver fell below the $27 mark for the first time since May 6, and plunged 6% in the day.
Gold bulls are liquidating positions amid a broader stock market sell-off, although analysts say gold's safe-haven appeal remains strong as concerns about a U.S. recession grow and Israel prepares for possible retaliation from Iran.
Global stocks continued to slump on Monday, with Japanese shares posting their biggest one-day drop since October 1987, as fears of a U.S. recession prompted investors to sell risk assets. Data on Friday showed that the U.S. unemployment rate rose to 4.3% in July, increasing the likelihood that the Federal Reserve will cut interest rates by as much as 50 basis points in September.
Adrian Ash, director of research at Bullionvault, said: “There is some truth to the old saying that all correlations converge in a crash. And as traders need to close profitable positions to cover margin calls on other assets, gold’s volatility speaks to the extent of panic in the stock market.”
"Whenever there is clear weakness in the stock market, investors who view gold as a risk hedge will liquidate some of their gold holdings to meet potential margin calls," said StoneX analyst Rhona O'Connell. "When the weakness passes, they almost always buy gold again."
She added: “(Gold) may face resistance at its all-time high of $2,484, but geopolitical tensions and concerns about whether the Fed is behind the curve are supportive for gold.”
“In the short term, the need to cut risk exposure probably outweighs anything else,” said Ole Hansen, head of commodity strategy at Saxo Bank. Still, he remains “bullish on gold,” citing supportive factors including a plunge in U.S. 10-year Treasury yields, a weaker dollar, geopolitics and the market pricing in the prospect of a rate cut by the Federal Reserve.
Gold has risen more than 15% so far this year, helped by central bank buying by Asian consumers and expectations of an imminent rate cut by the Federal Reserve in recent months.
Among other precious metals, spot platinum fell and palladium fell 4%. Automakers use both metals in engine exhaust to reduce emissions.
O’Connell added that both metals are under pressure due to the long-term risks associated with the transition to net-zero emissions, but there are a lot of short positions that will eventually be closed, so there is a good chance they will both reach around $1,000.
The article is forwarded from: Jinshi Data
