Gold Comex skyrocket to $1502.25/oz, the level not seen in last 6½ years, after Trump blamed China for Yuan manipulation, Growth worries, falling bond yield also added flavor to the rally…
Prices of gold Comex continued bull party and have shined more than 17% so far this year while, its has shown exploding performance especially since June, gained more than 14%.
Such performance was long awaited, in fact performance from 2015 to 2018 was totally lull, as shiny metal was awaiting strong trigger that can blast to a lasting rally, the one that we had seen from 2003 to 2011. But between 2015-2018 thing that was noticeable was it wasn’t making new lows in the era of monitory tightening by the US Federal bank, first sign that it has bottomed out for long-term.
Factors that led to recent catastrophic gains are
US-CHINA Trade Spat retching up to another level
Recent decision of U.S. President Donald Trump of imposing an additional 10% tariff on $300 billion worth of Chinese imports starting Sept. 1 has spoiled the mood of the global stocks markets and industrial commodities. Tensions heightened after China's Foreign Ministry on Friday pledged "countermeasures" if the U.S. goes ahead with President Trump's plan.
Trump blaming China for currency manipulation
Donald Trump administrations accused China for currency manipulation, after Chinese Yuan plunged to a new 11-Year low of 7.06 a dollar, which lead to further tumble in the stock markets and another booster for gold’s sparking rally.
Plunging bond yields signaling one more rate cut in the US this year
Another solid factor that underpin gold’s upside has been decline in global government bond yields. Declining bond yield hints expensive central bank monetary policies. US10-Year bond yield fell to a 2½-Year low of 1.677% and the German bund yield slid to a new record low of -0.54%. Recent gigantic correction in the Bond yields signals likely one more rate cut this year by the US Fed. If this will happen gold’s recent wave will take the prices to further highs.
Rupee weakness and increase in import duty added outperformance in India
India, world’s second largest consumer of gold, has showed outperformance, posted a return of Rs6439/10 grams or 20.5% year till date to hit a record high of Rs37830 in Mcx October future today. Weakening rupee that has slipped from 69.5 to 71.3 in less than a week recently and increase in import duty by 2.5% by recent India budget led to such outperformance here in India.
Investment demand continues to rise as Gold ETF surged to a 6-year high
Gold SPDR holding, which account for almost 80% of total EFT holding, surged to 6-year high of 836.92 tonnes while Silver ETFs long rose to a new record high.
Ongoing trade and geopolitical tensions, along with dovish central bank expectations, falling Bond yields and stock markets have sparked fund buying.
Prices are likely to head towards $1550/$1600. Downside supports are $1400/$1365.
Story by tarunsatsangi.com