Gold Prices Breach $1,430 In Asian Trading On Rising Demand, Risk-Off Appetite
Editor's Note: Get caught up in minutes with our speedy summary of today's must-read news stories and expert opinions that moved the precious metals and financial markets. Sign up here!
(Kitco News) - Gold continued to see strong gains as Asian markets opened on Wednesday with the metal gaining more than 1% on the day and trading above the $1,430 an ounce level on increased demand and risk-off sentiment.
After falling back below the $1,400 on Monday, the precious metal’s rally is back on with spot gold on Kitco.com last trading at $1,433.80, up 1.11%.
“The rally in gold continues, sparked by increased open interest, higher closes, higher volume, higher moving averages as short week continues,” wrote RBC Wealth Management managing director George Gero.
Rising demand, risk-off appetite, and bargain buying are all supporting the metal’s move higher, said Kitco’s senior technical analyst Jim Wyckoff.
“The safe-haven metal is seeing renewed demand from traders and investors as their overall risk appetite is less robust than that which was seen on Monday. Bargain buyers also stepped in to buy the recent corrective dip in an uptrend. A drop in the U.S. dollar index today also helped out the precious metals market bulls,” Wyckoff wrote.
From the geopolitical point of view, U.S.-China trade talks as well as the potential trade conflict with what EU have been weighing on the markets, added Wyckoff.
“The marketplace is not quite so upbeat on the prospects of a final agreement [between the U.S. and China] any time soon. There is speculation now that a deal won’t get done ahead of the 2020 U.S. presidential election. Furthermore, there was some downbeat U.S. manufacturing data released Monday and the Trump administration is again threatening the European Union with trade tariffs,” he said.
Analysts have high expectations for gold during the second half of the year, with Bloomberg Intelligence highlighting higher prices as the theme for Q3 and Q4.
“Gold has worthy catalysts for price gains after five years of caged trading. It stands to be the primary beneficiary, absent a definitive U.S.-China trade accord that reverses accelerating global declines in sovereign-debt yields, rate-cut expectations, and increasing stock-market volatility,” BI senior commodity strategist Mike McGlone said in the July outlook.
Gold is being driven largely by the assumption of peak U.S. dollar and expectations of the Federal Reserve rate cuts.
“The foundation for higher gold prices has rarely been stronger. Five years of consolidation, with elevated risk of downside in a dollar that's near multi-decade highs coincident with similar upside potential in stock-market volatility, supports gold prices. Additional backing comes from anticipated Fed easing,” McGlone explained.