- Dip buyers stepped in. Gold gained as much as 1.1% to near $3,915 an ounce on Monday after a 3.7% slump on Friday took it to its lowest in a year and rounded off the metal’s worst October since 2008, according to Bloomberg; spot gold was up 0.7% at $3,903.15 at 11:34 a.m. in Singapore.
- Silver bounced harder. Silver gained 1.8% to $49.98 an ounce after dropping nearly 6% on Friday, while platinum and palladium were little changed after big declines, and the Bloomberg Dollar Spot Index was 0.1% higher.
- ETF holders are under water. Most of the nearly 150 tons added to gold-backed ETF holdings since mid-July are now loss-making, and that buildup is “at risk of moving underwater, as prices approach 15% to 20% below their recent peaks,” said Justin Lin of Global X ETFs.
- Tighter policy is the main headwind. Expectations of tighter monetary policy continue to weigh on the non-yielding metal, said Bas Kooijman of DHF Capital, according to The Wall Street Journal, which put spot gold up 0.6% at $3,898.35 in early Asian trade.
What Happened?
Gold rose as lower oil prices offered some respite from inflationary pressures, after Axios reported that President Donald Trump wants to give diplomacy more time before deciding whether to resume strikes on Iran after Tuesday’s midterms. A global rout in technology stocks has also pressured precious metals, as investors liquidated bullion to cover losses elsewhere during Friday’s AI selloff, but that selling eased in Asian hours as US equity futures turned higher.
Why It Matters?
The metal’s drop below $4,000 is testing investors’ resolve. Saxo Bank’s Ole Sloth Hansen said Friday’s close below the key technical level of $3,886 “leaves gold vulnerable to additional downside pressure,” and that a recovery above $4,000 would be needed to restore “a more neutral short-term outlook.” Lin expects some dip buying from investors and possibly central banks, “but gold is undoubtedly sitting at precarious levels.” Rate-hike expectations, driven by oil-fueled inflation, are the key link between gold and the Fed.
What’s Next?
Kooijman said a pullback in oil or easing regional tensions could ease inflation and rate-hike worries and support gold, while further supply disruptions or a stronger-than-expected October employment report, due Friday, would reinforce the case for tighter policy. Watch the $3,886 support and $4,000 resistance levels, the midterm results and any escalation in the Middle East.
Affected Tickers and Coins: GLD, IAU, SLV, GDX
Source: Bloomberg, The Wall Street Journal
