Gold Drops as China Policy Shifts and U.S. Dollar Gains

APMEX

10/8/2018 11:06:40 AM

Daily Gold & Silver Market Report – 10/08/2018

• Chinese policy shift leads to Gold price decline.
• More market instability may be needed to see a big rebound for Gold.
• Bitcoin proponents use relative stability to encourage new support.

During international trading Monday, Gold prices dropped as the U.S. dollar gained strength. This decline came after the central bank of China shifted to a softer domestic policy position to support growth as the ongoing trade dispute with the United States continues. On Sunday, the People’s Bank of China released a statement that cash levels required in bank reserves had been cut in hopes of lowering financing costs and stimulating growth. In an article published by Reuters, economist John Sharma pointed out while the dollar had only slight gains thus far, the markets could see China’s decision as a sign of “softness” in regards to the trade war, so additional dollar growth may still be ahead.

The dollar index was up Monday morning while the Chinese yuan was down, but the drop was not as significant as some anticipated. The price of Gold has slipped more than 12 percent since April, a decline mostly attributed to the strengthening dollar and increasing U.S. interest rates. On Friday, the Labor Department report indicated unemployment rates in the United States are near 49-year lows and wages are also on the rise. These factors could keep the Fed’s interest rates soaring and continue pressure for Gold and other dollar-denominated Precious Metals.

Top Analyst Says Market Volatility Needed for Gold Price to Reach $1,400

HSBC Senior Precious Metals Analyst Jim Steel recently said Gold prices would not reach $1,400 per ounce unless financial markets become more volatile. In a report published by S&P Global, HSBC predicts Gold prices will average $1,274  per ounce for 2018 and $1,292 per ounce during 2019. The British banking institution points to a lack of volatility in fixed-income assets and equities over the last few months as primary reasons Gold has been held down. “With this aging equities rally globally, if we do get some financial market uncertainty, I think Gold's likely avenue for a rally will be through a rise in volatility,” Steel said.

While new tariffs and sanctions have recently been implemented both by and against the United States, Gold has not seen a return to popularity as a safe-haven investment. Instead, investors have focused their interest on U.S. Treasury notes, anticipating continued interest rate hikes. Steel added, “U.S. equities have gone up, there has been a flight of cash into U.S. Treasuries and that has kept U.S. interest rates relatively low, despite the fact that the Fed has tightened the front end of the curve. That has resulted in a stronger U.S. dollar, and that has weighed on Gold.”

Price of Bitcoin Up as Investors Look for Signs of Stability

The price of Bitcoin traded somewhat higher Monday morning as investors look for reasons to get prices out of their ongoing ebb. Some traders hope for volatility, but mainstream proponents of cryptocurrency are appreciative of the currently limited fluctuations, framing it as evidence that Bitcoin is useful as an asset and moving away from the large intraday swings seen previously. In an article on MarketWatch, eToro Senior Market Analyst Mati Greenspan stated, “As we’ve stated many times, a stable price is great for adoption, and great for development of the network. So, we really are in a positive place for Bitcoin right now.”

At 11:39 a.m. (ET), the APMEX Gold and Silver spot prices were:

• Gold, $1,187.50  Down $16.90
• Silver, $14.37  Down $0.34
• Platinum, $816.50 Down $8.00
• Palladium, $1,071.50 Up $3.40

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