Gold price climbs as equity markets stumble
London (Oct 13) Gold prices were higher on Monday morning, in contrast with a drop in European equity markets that sent investors to the perceived safety of precious metals.
Spot gold was last above the all-important $1,230 level at $1,230.30/1,231.10 per ounce, up $7 on the pre-weekend close, having earlier spiked as high as $1,238.
Riskier assets have lost some of their shine on concerns about global growth, with the S&P 500 down 1.1 percent on Friday and 3.1 lower over last week, for example. This morning, the Euro STOXX 50 is down 0.04 percent, the FTSE 100 down 0.25 percent, the CAC 40 down 0.15 percent and the DAX down 0.05 percent.
“Gold is profiting from the weak equity markets,” Commerzbank said in a note. “According to the CFTC’s statistics, speculative financial investors initially did not retreat any further from gold in the week to 7 October, meaning that the interim weakness of the gold price – which dipped to a nine-month low of $1,183 [last week] – is doubtless due to other factors.”
The strength of the dollar is one of those factors generally weighing on gold – it was last at 1.2675 against the euro, softer by around half a cent but still close to recent 25-month lows.
“Precious metals are finding support from the still weaker US dollar, as well as from statements by a number of FOMC members. They are warning against the consequences of weak global growth – driven by Europe – and an overly strong US dollar and are in favour of normalizing US monetary policy later than previously anticipated,” Commerzbank added.
The dollar ended last week lower for the first time in around three months – and on better physical demand out of China and India, with the all-important festival of Diwali in the next couple of weeks.
Data today is unlikely to add volatility into the market, with US markets closed for Columbus Day and a bank holiday in Japan.
This morning, the Chinese trade surplus at $31.0 billion was below the forecast $41.2 billion and down from the previous month’s 49.8 billion, while the German WPI was as predicted at 0.1 percent. Eurogroup meetings are also taking place today.
The data calendar turns busier later this week, with eurozone and German economic sentiment due in Tuesday and the US PPI, retail sales and the Empire State manufacturing index on Wednesday as well as the Fed’s beige book.
On Thursday, the eurozone will release its CPI, final CPI and trade balance while from the US Unemployment Claims, the Philly Fed Manufacturing Index, Industrial Production and the Capacity Utilization Rate are due before Building Permits, Housing Starts, Preliminary UoM Consumer Sentiment and Preliminary UoM Inflation Expectations on Friday.
In the other precious metals, silver was last at $17.45/17.50 per ounce, up 11 cents, while platinum was up $6 at $1,259/1,269 and palladium was $8 higher at $785/790.