Gold investors finally received some good news on Wednesday when the price of the metal jumped after Tuesday’s sharp loss. International markets reflected a 0.2% rise per ounce to $1486.53 after a 1.7% slump in the previous session, the single biggest drop in a month.
Analysts attribute today’s jump to the market excitement over a possible China-US trade deal and some solid US economic data which hyped the risk sentiment, dipping the prices of safe-haven assets such as gold and silver. On top of that, the US Dollar also gained against several major currencies.
When the dollar value soars, precious metals like gold become expensive in other currencies.
“Gold and silver prices witnessed correction with a rally in equity indices as US and China are getting closer to sign the Phase 1 deal,” HDFC Securities said in a recent statement. The analysts further added that gold prices will most likely remain choppy in the near future.
According to sources involved in the China-US trade talks, the negotiations are likely to yield a possible trade deal in the course of the month. But even without the deal, the demand for gold is still high with the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, stating that the demand rose from 914.67 tons to 915.85 tons between Monday and Tuesday.
Since August, the gold stockpiles have been rising consistently on a weekly basis, save for a single week in September. ETF backed gold has also hit an all-time high since 2013 after last week’s decent rise.
The World Gold Council on Tuesday reported the stockpiles of ETF-backed gold had risen to a record high of 2,855.3 tons in quarter three. But even with the constant price corrections, most global gold markets have registered more than a 15% increase in the value of gold this year. However, in weaker economies, high gold prices are causing a drop in demand for the metal.
If the ongoing trade war and Brexit were to persist, most economies are likely to weaken even further, lowering the demand for gold.
But the next couple of days will tell the story of the next big moves in gold. With the metals enjoying the market support at the moment, a rally wouldn’t be a surprise.