Gold topped $1,500 an ounce on Comex early Wednesday and then rose another $10/ounce over the last two hours as global economic concerns continue to grow. The Dow dropped over 400 points at the opening bell.
“Yields are collapsing, and gold is soaring,” said Peter Cardillo, chief market economist at Spartan Capital Securities to CNBC. “That’s raising concern about the impact of the trade war on the economy.”
December futures rose to the highest level for a most-active contract since 2013. Gold has strengthened in recent months amid the U.S.-China trade standoff, slowing global growth and easing monetary policy. Yesterday, metal touched $1,502.30 after settling Tuesday at $1,484.20. Currently the December contracts are at $1,513.30, up $29.10
Goldman Sachs said it no longer expects a trade deal between the U.S. and China to be struck before the 2020 U.S. presidential election, while Morgan Stanley warned that more tit-for-tat tariffs could tip the world economy into recession by the middle of next year, CNBC reported.
Global equities tumbled Monday after China’s central bank let the yuan slip below 7 per dollar. U.S. President Donald Trump subsequently labeled the country a “currency manipulator.” The reference rate was set a little stronger Wednesday at 6.9996, Bloomberg reported.
Five Asian central banks have rate decisions this week. New Zealand surprised the markets on Wednesday with a 50-basis-point rate cut. The Reserve Bank of India later reduced rates by a 35 basis points. On Tuesday, Australia’s central bank held interest rates at a record low.
Also Tuesday, James Bullard, the St. Louis Federal Reserve President, said he didn’t think it was “realistic” for the U.S. central bank “to respond to each threat and counter threat in a tit-for-tat trade war.” His remarks came as expectations are growing that the Fed will follow its July 31 rate cut with a second one in September. The CME FedWatch Tool put the odds of a Sept. 18 rate cut at 100% early Wednesday, compared with 50.7% a week earlier. The tool put the probability of a 25-basis-point reduction at 69.6% and the likelihood of a 50-basis-point cut at 30.4%.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.21% to 836.92 metric tons on Tuesday from 835.16 metric tons on Monday, Reuters reported.
Meanwhile, VanEck Vectors Gold Miners ETF – the largest exchange-traded fund that tracks gold miners – attracted the most speculators in the latest sign of growing interest in the precious metal, Bloomberg reported. The ETF’s call and put options open interest, a tally of outstanding contracts, is hovering near an all-time high reached on Thursday after the metal climbed. The fund that trades under the ticker GDX climbed 36% this year, more than double the pace of gain for the precious metal.
Silver futures also climbed on Comex early Wednesday. September futures were up 1.1% in the first two days of the week and settled at $16.45 an ounce Tuesday on Comex and is currently at %17.160 for the December contract.
Spot platinum was little changed early Wednesday after slipping 0.3% on Tuesday. Spot palladium was lower. It gained 2.4% in the first two days of the week.
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