Gold Traders Ignore Market Stress

Gold confounded investors this week as global markets moved into “shock trading” most would have expected precious metals to continue their climb from last week, but this is not the case. Gold has remained fairly flat throughout Monday and in the Asian session on Tuesday. Gold is currently trading at 1154.00. Silver tumbled on Monday as the demand for base metals bottomed and recovered a bit in the early session today adding 68 points to reach 14.83 well below the $15 psychological support level.  Platinum and palladium are both in the red. Platinum gave up almost $2 to 988.80 while palladium suffered a significant decline falling $11.60 to 561.30.

Exchanges across Asia dropped all day on Monday as growing fears over the pace of growth in China after a gauge of manufacturing on Friday sapped equity markets on Wall Street and in Europe. China’s Shanghai Composite index was down 8.6 per cent in afternoon trading, while Japan’s Nikkei 225 index fell 4.1 per cent. The dwindling demand for stocks eroded investors’ appetite for other risk-sensitive assets. For some reason gold traders completely ignored the market action as traders moved to the euro and the yen as safe haven moves. Gold was a drop below a seven-week high on Tuesday as equity markets and the U.S. dollar rebounded from a brutal selloff in the prior session that was fuelled by fears over the fate of the Chinese economy. After Monday’s rout, most Asian stocks recovered in tandem with U.S. futures and Chinese shares pared losses. The dollar rose 0.6 percent versus a basket of currencies after falling the most since 2011.

Limiting gold’s upside potential were comments from a FOMC member who held to his view that a U.S. interest rate hike would happen this year. Atlanta Fed President Dennis Lockhart said the Fed will likely begin raising rates “sometime this year,” even as the steep drop in oil prices clouds the inflation outlook. Two weeks ago, Lockhart said he was “very disposed” to a rate hike in September.

Copper was one of the worse hit commodities falling to trade at the 2.20 level but regained 35 points this morning as traders bought up the cheap commodity. Between the low dollar and the low price of commodities traders are buying into the markets to take advantage of the severe declines on Monday. Copper and aluminum futures lost more ground on Monday with both markets dropping to the lowest levels since 2009 on concerns over slowing economic growth in China, the world’s top consumer of industrial metals. Copper on the London Metal Exchange slid as much as 2.6 per cent its lowest since July 2009. Copper has shed 22 per cent in 2015, falling for a third consecutive year. Aluminum gave up 1.3 per cent its weakest since June 2009. Activity in China’s factory sector shrank at its fastest pace in almost 6-1/2 years in August as both domestic and export demand dwindled. 

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