The fresh uncertainty helped boost the precious metal’s safe-haven appeal while a reversal of the Trump trade could catalyze additional selling activity, according to TD Securities commodity strategist Daniel Ghali.
At the same time, traders are also weighing signs of buying fatigue in Asia, a key pillar in gold’s rally in the first half of the year. The premium gold on the Shanghai Futures Exchange held against its London counterpart since late last year has flipped to a discount, signaling falling demand from the Asian nation.
This along with liquidations on SHFE signals that “the window for downside is open in the yellow metal,” Ghali said in a note.
Gold has surged by more than 15% this year, hitting an all-time high last week. The precious metal has been supported by expectations of interest rate cuts by the US Federal Reserve, strong buying by central banks and haven asset demand amid ongoing geopolitical tensions.
Trump’s odds of winning the US election race have edged lower since Biden announced he would step aside, but he remains the front runner.
If successful, his administration could unleash both bullish and bearish forces on gold. For instance, the possibility of tax cuts, tariffs and duties could push up inflation and force the Fed to increase rates more than it otherwise would. Higher interest rates are typically bearish for non-yielding gold. But Trump has also signaled a preference for the dollar to weaken, which is potentially bullish for commodities — including the yellow metal — priced in that currency.
Meanwhile, China’s gold imports plunged last month — the nation has increased support for the economy with surprise interest rate cuts, seeking to prop up growth after a lack of short-term stimulus.
Exchange-traded funds added 87,612 troy ounces of gold to their holdings in the last trading session, with total gold ETF holdings registering a fourth weekly gain, the longest winning streak since November. And money managers’ net-long positions in gold futures recently hit the highest since early 2020, according to data from the Commodity Futures Trading Commission.
Spot gold was down 0.6% to $2,386.26 an ounce by 11:28 a.m. in New York. The Bloomberg Dollar Spot Index was down 0.1%, while US 10-year Treasury yield edged lower. Silver, platinum and palladium all fell.
(By Yvonne Yue Li and Jack Wittels)
