Gold price returns in correction, declining by 0.76% to 1,495.77 USD per ounce after yesterday conquered the 1,500 USD threshold. However, the precious metal is performing particularly strong since the beginning of the year and gained more 200 USD since the beginning of the year.
Although Wells Fargo expressed their mistrust in the price of gold, already when it was 1,425 USD, the precious metal continues its uptrend. However, the main reason for the strong performance is the geopolitical picture, trade wars and the uncertainty for global economic growth. In such turbulent time, the investors are looking for security and accordingly are not speculating on secondary assets.
On Wednesday, gold soared over 2% to break the 1,500 USD barrier for the first time in over six years. This happens after the central banks in New Zealand, India and Thailand surprised markets with aggressive monetary policy easing on Wednesday. This usually pushes the price of the precious metal up. The moves by central banks around the world are very important, and the focus we are getting on currency markets for the potential for competitive devaluation remains supportive for gold.
Everything is looking up for the investor on long positions for the gold right now. It’s important to remember though that gold, in particular, has some elastic pricing potential, and that it can really hurt when a rubber band snaps back. With these four primary drivers of gold’s rise to 1,500 USD per ounce over the last few days, it’s very possible that one could peter out or even reverse and still gold could continue higher. But, if just one of these factors were to go away and gold were to fall back below the 1,485-1,500 USD range, that could signal a strong collapse in the price of yellow metal from these highs, maybe as low as 1,450 USD.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 1.02% to 845.42 tonnes on Wednesday from 836.92 tonnes on Tuesday.
Meanwhile, the silver price declined by 0.82% to 17.02 USD per ounce, while platinum is down by 0.86% to 860.15 USD per ounce.
Gold price analysis
Gold lacked any firm directional bias on Thursday and seesawed between tepid gains/minor losses, consolidating the recent upsurge to fresh multi-year tops.
Against the backdrop of the recent escalation in the US-China trade tensions, growing pessimism over the global economic growth outlook provided a strong boost to traditional safe-haven assets and turned out to be one of the key factors behind the precious metal’s strong rally from the post-FOMC swing lows to 1,400 USD mark.
A series of dovish central-bank surprises on Wednesday underscored the market concerns and reinforced by a fresh leg of a free-fall in the US Treasury bond yields, which further benefitted the non-yielding yellow metal and collaborated to the overnight sharp up-move to levels beyond the key 1,500 USD psychological mark.
However, the overnight solid rebound in the US equity markets, coupled with a modest pickup in the US Dollar demand – which tend to undermined demand for the dollar-denominated commodity – kept a lid on any strong follow-through up-move, rather prompted traders to take some profits off the table.
A strong follow-through recovery in the US bond yields continued exerting some downward pressure on Thursday, albeit the downside is likely to remain cushioned as market participants might have already started pricing in possibilities of two or more Fed rate cuts by the end of this year.
Thursday’s second-tier US economic releases – the usual initial weekly jobless claims and Final Wholesale Inventories – seems unlikely to produce any meaningful trading opportunities, leaving Gold at the mercy of the broader market risk sentiment and the USD price dynamics.