Gold Whipsaws as Market Tests New Levels After Historic Retreat
Gold whipsawed, after a partial recovery from a historic rout, with traders seeking clarity over US monetary policy after the nomination of a new Federal Reserve chair. Silver fell sharply.
Spot gold fell as much as 2.5% in choppy trading, having failed to hold an earlier foray above $5,000 an ounce. Bullion had clawed back some losses in the previous two sessions following the collapse. Silver plunged as much as 14%.
Precious metals soared last month in a rally underpinned by speculative momentum, geopolitical upheaval and concerns about the US central bank’s independence. The surge came to a sudden halt at the end of last week, with silver seeing its biggest ever daily drop on Friday and gold plunging the most since 2013. Though the yellow metal is about 12% below an all-time high hit on Jan. 29, it is still up 14% for the year.
Markets are weighing the policy implications of Kevin Warsh’s nomination as Federal Reserve chair, with President Donald Trump saying Wednesday he would not have nominated him for the role had he expressed a desire to hike interest rates. Trump said in an NBC News interview there was “not much” doubt the Fed would lower rates again — a tailwind for precious metals, which don’t pay interest.
“Price action is likely to remain volatile until there is greater certainty on the monetary policy outlook,” Standard Chartered Plc analysts including Sudakshina Unnikrishnan said in a note. Some of this near-term volatility is resulting from investors redeeming their holdings in exchange-traded products, they said, but “structural drivers remain intact and we continue to expect a rebuild to the upside.”
Many investors and analysts believe the fundamentals that drove bullion to record highs remain in place, including elevated central-bank buying and a diversification away from sovereign bonds and currencies. Fidelity Fund, which sold a chunk of gold holdings days before the plunge, is watching for an opportunity to buy again, portfolio manager George Efstathopoulos told Bloomberg News on Tuesday.
Many banks have also backed gold to recover, with Deutsche Bank AG saying on Monday that it was standing by its forecast for bullion to rally to $6,000 an ounce. Goldman Sachs Group Inc. said in a note that it sees “significant upside risk” to its year-end forecast of $5,400.
Spot gold was 2.3% lower at $4,850.16 an ounce as of 10:48 a.m. in Singapore. Silver was down 14% at $75.87. Platinum and palladium retreated. The Bloomberg Dollar Spot Index, a gauge of the US currency, was steady after ending the previous session up 0.3%.
Source : Bloomberg
