Gold prices down after central banks drove demand, stocks worldwide mostly down
ALBAWABA – Gold prices tumbled from the all-time high they reached earlier on Monday as stocks worldwide mostly tumbled ahead of the holiday season in the United States (US) and Europe.
Bullion has rallied almost 16 percent since early October, according to Bloomberg, driven mainly by recent volatility in the Middle East region and Palestine in Particular.
Bets that the Federal Reserve (Fed) is done hiking US interest rates and may be cutting them as soon as early next year also bolstered the rally in gold prices and stocks worldwide.
Earlier today, Monday, spot gold prices hit an all-time high of over $2,100 an ounce, according to Bloomberg, but have since slipped, as reported by GoldPrice.org, to $2,064.11.
On Sunday, gold prices had reached a new 50-year high, at $2,072.13. The rally carried well into Monday, as the precious metal hit an intraday record $2,135.39 an ounce.
According to Reuters, there was no obvious catalyst for what could be the sharpest interday rise and fall in gold prices in decades.
Paradoxically, gold prices and stocks worldwide have enjoyed a significant rally recently and are both sliding ahead of the holidays - Shutterstock
Reuters’ surveyed Traders suspect the hidden hands of trend-following Calls to Action (CTAs) and automated algorithm-based trading funds to be responsible for the rally beyond $2,100.
As US treasuries slip, central banks are also buying gold, Reuters reported. A net 800 metric tons in the year to September has been procured by central banks around the world, settling a record for the period. Gold bulls are now touting chart targets at $2,240 and $2,400.
Markets are pricing early and aggressive rate cuts next year, which is clearly a positive for non-yielding gold. Reuters reported Fed fund futures are currently pointing to a 59 percent chance of a US rate cut as early as March. A week ago that probability was around 20 percent.
In Europe, markets are also reportedly pricing in an 80 percent chance of the ECB easing in March. Even though the hawkish head of Bundesbank pushed back against such prospects in an interview over the weekend.
As for stocks worldwide, European markets fell at the open and Asian stocks closed lower early on Monday, according to Agence France-Presse (AFP).
Gold prices down as stocks worldwide slide, except Wall Street
Hong Kong stocks sank again as investors brushed off a rally on Wall Street and growing rate expectations in the new year.
The Hang Seng Index fell 1.09 percent, or 184.25 points, to 16,646.05, while the Shanghai Composite Index lost 0.29 percent, or 8.72 points, to 3,022.91. The Shenzhen Composite Index on China's second exchange also slipped 0.34 percent, or 6.34 points, to 1,881.64, as reported by AFP.
Tokyo stocks closed lower as a stronger yen versus the dollar weighed on export-oriented companies.
The benchmark Nikkei 225 index lost 0.60 percent, or 200.24 points, to 33,231.27, while the broader Topix slipped 0.83 percent, or 19.87 points, to 2,362.65.
Stocks worldwide have a complex relationship with the US dollar, visa vi local currencies, but gold prices have a relationship that usually exhibits an inverse correspondence to major currencies - Shutterstock
The dollar fetched 146.77 yen in Asian trade, according to AFP, down from 146.84 yen in New York and 148.05 yen in Tokyo on Friday.
European stock markets fell at the start of trading following losses in Asia, with London's benchmark FTSE 100 index down 0.4 percent to 7,502.97 points.
In the Eurozone, the Paris CAC 40 dropped 0.2 percent to 7,328.31 points and the Frankfurt DAX lost less than 0.1 percent to 16,393.37.
The Dow Jones and S&P500 indexes were both trading up by 1223 Amman Time, according to Reuters, while the NASDAQ and NYSE Composite were unchanged. The Dow was up 0.82 percent, at 36,245.50 points, and the S&P 500 up 0.59 percent.
Stocks worldwide and Markets Summary by Bloomberg:
The Stoxx Europe 600 was little changed as of 8:56 a.m. London time
S&P 500 futures fell 0.2 percent
Nasdaq 100 futures fell 0.2 percent
Futures on the Dow Jones Industrial Average fell 0.1 percent
The MSCI Asia Pacific Index was little changed
The MSCI Emerging Markets Index was little changed
The Bloomberg Dollar Spot Index rose 0.2 percent
The euro fell 0.2 percent to $1.0866
The Japanese yen was little changed at 146.81 per dollar
The offshore yuan fell 0.2 percent to 7.1399 per dollar
The British pound fell 0.3 percent to $1.2667
The yield on 10-year Treasuries advanced five basis points to 4.24 percent
Germany’s 10-year yield was little changed at 2.36 percent
Britain’s 10-year yield advanced two basis points to 4.16 percent
