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Gold|Platinum
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gold|platinum

Gold halts slide after market rout triggered margin-call selling

A stack of gold bars

Photo by Bloomberg

6th August 2024

By: Bloomberg

  

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Gold steadied after being pulled into Monday’s global rout, when it slumped as some traders cut holdings to cover potential margin calls.

Spot bullion plunged as much as 3.2% in the previous session, the biggest intraday drop since early June, before paring losses. Prices traded in a daily range of more than $90 as shares and commodities tumbled.

With equity markets expected to encounter further volatility even as most shares climbed in Asia on Tuesday, gold is expected to attract fresh buyers. While the metal is traditionally regarded as a haven, it’s common for prices to retreat at times of intense market dislocation, only to rebound afterward.

“Long-gold positions now offer portfolios the greatest hedging value across commodities,” Goldman Sachs Group Inc. analysts including Daan Struyven said in note, sticking with a forecast for the metal to rally to $2 700 an ounce in 2025. Bullion can be a buffer against geopolitical shocks including wars, trade tariffs, and US sovereign-debt fears, they said.

Gold is still up by about 17% so far this year after hitting an all-time high in July, mainly supported by bets the Federal Reserve will pivot to monetary easing. Lower borrowing costs are positive for bullion as it doesn’t pay interest.

Concerns the US economy is sliding into recession saw swaps traders price in at least five quarter-point Fed cuts in 2024, with about 16% probability for an emergency reduction before its next scheduled meeting wraps on Sept. 18.

Bullion has also been aided by increased purchases by central banks and Asian consumers. Rising geopolitical tensions in the Middle East — with Israel bracing for an attack from Iran and regional militias — have also supported prices.

Spot gold was little changed at $2 414.39 an ounce by 9:18 a.m. in Singapore. The Bloomberg Dollar Spot Index edged higher after Monday’s 0.3% decline. Silver gained 0.7% in the wake of its 4.5% tumble, while platinum and palladium rose.

Edited by Bloomberg

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