Gold sheds 1% as risk appetite recovers

Gold prices fell more than 1% on Monday as concerns eased that major economies could tip into recession, boosting investors’ affinity for risk and detracted from bullion’s safe-haven allure.

Spot gold was down 1% at $1,498.35 per ounce, while U.S. gold futures fell 0.97% to $1,508.7.

“There has been some pullback in terms of the concerns over the risk of a recession. Perhaps the market’s reaction to events in the past week have been too much, so there has been some positive retracement of equity markets and downward pressure on gold,” said Jeff Klearman, portfolio manager at GraniteShares.

However, “fundamentally things have not really altered at this point; the underlying factors still support gold, which are accommodative central banks around the world, fears of slower global growth and U.S.-China trade tensions.”

Benchmark U.S. Treasury yields rose on Monday, easing concerns of a recession, after the U.S. yield curve between two- and 10-year bonds inverted for the first time since 2007 on Wednesday, flashing warning signals for the economy.

Wall Street rose after China’s plans for interest rate reform reinforced hopes that major economies would act to counter the impact of escalating global trade tensions.

Over the weekend, U.S. President Donald Trump and top White House officials dismissed concerns that economic growth may be faltering, saying they saw little risk of recession. Trump also said he was “not ready to make a (trade) deal yet” with China.

Markets are now focused on the U.S. Federal Reserve’s Jackson Hole symposium this week for greater clarity on the future path of interest rates.

“We would expect that (Fed Chairman Jerome Powell) will be looking to reflect again on the state of the international economy and probably pave the way for a 25-basis point cut in the Fed funds target rate,” INTL FCStone analyst Rhona O’Connell said in a research note.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, have increased by about 15 tonnes so far this month, and stood at 843.41 tonnes on Friday.

Speculators trimmed their bullish stance in COMEX gold and cut net long positions in silver contracts in the week to Aug. 13, a report showed on Friday.

Elsewhere, silver dipped 0.6% to $16.98 per ounce. Platinum rose 1.4% to $856.03 an ounce, while palladium gained 2.3% to $1,480.95.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya