Gold Price Threatens Monthly Lows as Investors Buy China Trade-Deal Hype

October 15, 2019 12:30 UTC

The price of gold declined sharply on Tuesday, erasing earlier gains and threatening to re-test the lows from last month as investors flocked to risk assets over apparent U.S.-China trade progress.

Gold’s Violent Pullback

Futures on December gold delivery plunged all the way down to $1,482.60 a troy ounce, the lowest since Sept. 30. Bullion was last down $13.20, or 0.9%, at $1,484.40 on the Comex division of the New York Mercantile Exchange.

Gold is fast approaching last month’s low print near $1,472 an ounce. | Chart: bloomberg.com

Gold pierced through $1,500 earlier in the session but failed to keep the momentum alive as investors dumped haven metals in favor of stocks and other risk-on assets.

Silver, a precious metal that trades in lockstep with gold, plunged 25 cents, or 1.4%, to $17.45 a troy ounce. Silver’s premium to gold declined on Tuesday and was last seen at 84.82. That’s 84.82 ounces of silver for one ounce of gold.

Precious metals fell even as the U.S. dollar got weighed down by a basket of rival currencies. The U.S. dollar index (DXY) declined 0.2% to 98.26.

U.S.-China Trade Deal Hype Continues to Grow

The United States and China reached a tentative ‘phase one’ trade agreement last Friday, sparking a major liftoff in global stocks. Although Chinese state media have tried to temper expectations about a comprehensive trade deal, investors continued to cheer the apparent progress between the world’s largest superpowers.

After a brief pause on Monday, the Dow Jones Industrial Average (DJIA) rallied by as much as 333 points on Tuesday.

While gold has failed to generate a sustained bid for going on six weeks now, its long-term prospects are improving. Not only are gold exchange-traded funds (ETFs) benefiting from a large influx of capital, retail traders are pivoting toward precious metals to safeguard against economic turbulence.

According to Standard Chartered Bank, precious bullion will benefit from haven flows from the retail sector, sending prices even higher over the next 12 months. Suki Cooper, an analyst at the bank, has set a price target for gold at $1,570 a troy ounce by the fourth quarter of next year. She sees gold averaging $1,510 a troy ounce for the rest of 2019.

This article was edited by Josiah Wilmoth.

Last modified: October 15, 2019 22:41 UTC

@hsbourgi

Financial Editor to CCN Markets, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi. Sam is based in Ontario, Canada and can be contacted at sam.bourgi@ccn.com