Trade-war-weary investors turn to gold

A sell-off in equities last week, helped gold break above the narrow trading range of the past one-and-a-half months, with the metal jumping as much as 2.5% on Thursday, its biggest one-day percentage gain in more than two years.

“Gold remains supported by escalating geopolitical tensions.… Adding to the mix is the thought the FOMC [Federal open market committee] may consider pausing their widely expected rate hike in December if global equity markets continue to falter,” said Stephen Innes, Asia-Pacific trading head at Oanda in Singapore.

“An abrupt shift in Fed policy is likely to lead to a lack of confidence in the world’s most important central bank and could destabilise markets further.”

The Fed hiked rates in September for the third time in 2018 and is expected to raise them again in December.

Gold remains down by more than 10% from its April peak, pressured by a strong dollar as the China-US trade war unfolds and higher US interest rates.

China faced “tremendous uncertainties” due to the effect of tariffs and trade frictions, China central bank governor Yi Gang said on Sunday.

Gold speculators extended their net short position on Comex gold contracts by 29,881 contracts to 103,009 contracts in the week to October 9, data showed.

Spot gold may edge up to $1,235/oz, as suggested by a Fibonacci ratio analysis, said Reuters technical analyst Wang Tao.

Meanwhile, holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), rose 0.76% to 744.64 tons on Friday.

In other precious metals, silver was up 0.6% at $14.63/oz. 

Palladium rose 0.5% to $1,071.10 and platinum gained 0.5% to $840.50.

Reuters

Source: businesslive.co.za