Gold’s Roller Coaster

Gold's Rollercoaster

Gold’s roller coaster ride continued this morning, as the yellow metal shed some of the early, early morning gains that had hit six-year highs.

December futures touched $1,565 an ounce early Monday on Comex, the highest level for a most-active contract since 2013, driven by investors seeking a safe haven from the escalating trade war between the U.S. and China. Putting gold up more than 20% so far this year. Silver also rallied.

However, gold receded over $25/ounce nine hours later when President Trump announced that China had contacted U.S. trade officials overnight saying they wanted to return to the negotiating table. China has yet to confirm the comment.

Both gold and silver began their two-day ascent Friday following the latest salvo from U.S. President Donald Trump, who announced a 5% additional duty on $550 billion in targeted Chinese goods hours after China announced retaliatory tariffs on $75 billion of U.S. goods. Equities plummeted on the tit-for-tat moves and U.S. 10-year Treasury yields sank to three-year lows, spurring more investment in the precious metals, traditional hedges against uncertainty.

At Group of Seven summit over the weekend in France, Trump indicated he may have had some second thoughts about imposing the China tariffs, but the White House later stated that he wished he had raised the tariffs even more last week. On Monday, Chinese Vice Premier Liu said his country opposes the escalation of the trade war, Caixin reported.

The U.S.-China standoff, speculation about interest-rate cuts from the U.S. Federal Reserve and other central banks, fears of an economic recession and negative bond yields have spurred gold this month, along with geopolitical unrest.

The Fed will “act as appropriate” to keep the economy healthy, Chairman Jerome Powell said in a speech Friday in Jackson Hole, Wyoming. Investors had awaited his remarks for signals about what the central bank will do at its Sept. 18 meeting. The Fed’s July 31 interest-rate reduction which was the first by the central bank in a decade.

The CME FedWatch Tool put the odds of a Sept. 18 rate cut at 100% early Monday. It put the odds of a 25-basis-point reduction at 97.3.5% and the likelihood of a 50-basis-point cut at 2.7%.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.58% Friday to 859.83 metric tons, Reuters reported. Meanwhile, hedge funds and money managers increased their bullish stance on Comex futures in the week ended Aug. 20, data from the Commodity Futures Trading Commission showed Friday.

December gold futures advanced 1.9% last week to settle at $1,537.60 an ounce Friday on Comex. This morning finds the December contract at $1,543.90, up $6.30.

Silver futures outpaced gold last week, with the most-active September contract gaining 2.2% to settle Friday at $17.413 an ounce. It added to those highs early Monday. Currently, the September contracts are at $17.655. Both spot platinum and spot palladium also increased Monday after gaining 1% and 0.7%, respectively, last week.

In economic reports this week, this morning the U.S. durable goods orders for July rose a tad (.1% over the median forecast) investors will be watching Tuesday for the Case-Shiller home-price index for June and the Consumer confidence index for August. German GDP figures are also due out Tuesday. Revised U.S. second-quarter GDP numbers come out Thursday, along with weekly jobless claims. U.S. inflation and consumer-spending data for July are scheduled for release Friday.


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