Top Story

Gold on the brink as stocks and yields rebound

Gold has continued to ease back from its multi-year highs hit earlier this month, as we had highlighted the possibility last week here and here.  Demand for the precious metal has fallen amid the revival of hopes for a trade deal between the US and China, with talks set to resume next month. Beijing has released a tariff exemptions list for products from the US this morning, in a further sign of de-escalation in the dispute. Investors have piled back into equities and out of haven assets like gold, yen and government bonds. In turn, yields have risen from their lows, further dampening the appeal of the noninterest-bearing precious metal.

So, unless risk appetite turns sour again, or the dollar slumps — say, as a result of hawkish ECB or a very poor US CPI report tomorrow — gold could extend its losses further. Indeed, out of the two precious metals, gold looks more vulnerable than silver given the rosier sentiment towards risk assets, with the grey metal being supported by its other main use as an industrial material. Hence, or otherwise, the gold-silver ratio has been falling, making silver more appealing (or less attractive to the sellers) in the short-term.

At the time of writing, gold was a touch higher on the day but still down on the week. The metal has now fallen for the third consecutive week, following a 4-month rally. Yesterday, it broke its most recent low at around $1492/5 area. If the sellers want to put their foot down here, we could see the sell-off accelerate as more buyers are forced to rush for the exits with the next nearest major support being all the way down at $1450. However, if the bulls manage to cling on here and push the metal decisively back above the $1492/5 area today then this would indicate that a low is in place.

Source: FOREX.com and Trading View.


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.