Gold prices fell below $1,200 Wednesday, bringing prices on track for a loss in the past three sessions. Bullion now sits at the bottom of a range between $1,200 and $1,228 since the beginning of May. Also highlighting the volatility in this market, gold’s drop Wednesday caused the silver market to rise 1.9 percent, while platinum hit another multi-year high.
Gold took its largest hit in the past three sessions when risk-averse investors became more willing to buy safe-haven assets, following Monday’s slump in the U.S. stock market, which also pushed bonds up and the U.S. dollar lower.
Gold’s safe-haven status has driven record weekly inflows into exchange-traded funds tracking the metal. Although yesterday’s fall was certainly not justified, bullion did move lower because of favorable U.S. data. The U.S. jobless rate fell to 3.7 percent in May, the lowest since 2000.
While the decline in the labor market’s participation rate might be concerning, hiring is also strong, with an increase of 214,000 jobs in May, above economists’ expectations of 180,000.
Gold Price ‘Tricky’
Although bullion has posted a return of more than 9 percent in the past year, its direction has been difficult to predict, reflecting a broad increase in the market based on safe-haven investor demand. However, rising U.S. interest rates are seen as weakening the dollar. At the same time, overall inflation has remained low, implying that the U.S. Federal Reserve will likely not hike interest rates again.
As expected, stock markets were a bit confused by this, with the Dow tumbling 400 points in the first hour of trading Wednesday, and the S&P 500 shedding almost a full percentage point. At 11:20am, the Dow was down 0.2 percent, while the S&P 500 fell 0.4 percent and the Nasdaq was down 0.7 percent.
Vintage Gold Posts Another Record High
Silver prices climbed to near $15 an ounce Tuesday, their highest since May 1, hitting their first multi-day gain since November. Prices were traded as high as $15.06 an ounce, also their highest point since May 1.
The biggest gainers in the precious metals market were gold and silver. Platinum posted a gain of 1.8 percent, its highest price since August 2014. It traded near $1,200 an ounce on Wednesday, after hitting $1,207.22 Monday.
Epsilon Platinum Group Metals reported on Twitter Tuesday, “Platinum has posted its 6th longest weekly bull market, since early 2000. This record streak occurred before the 2008-2010 cycle of highs and lows that occurred in the prior decade.” This means that platinum’s bull market is in the middle of the third leg of its cycle, which began in 2009.
After the Brexit referendum and economic crisis in 2008, the metal’s prices peaked at a high of $1,935 an ounce on September 26, 2008.
Since then, platinum has struggled to shake off the negative sentiment that followed the 2008-2010 collapse, with prices dropping to $735 an ounce on May 5, 2011. However, platinum’s bull market has lasted longer than any other metal’s during the current cycle.
Also bouncing back to set a new multi-month high on Tuesday was gold, which got a lift after the weak jobs report. On Wednesday, the metal fell back below $1,200 an ounce.
Despite bullion’s record monthly gain, it now sits at the bottom of a range between $1,200 and $1,228 since the beginning of May. This reversal in trend of lower prices and record inflows into gold ETFs highlights investors’ anxiety surrounding geopolitical risks.
However, most recently, the U.S. Federal Reserve has indicated it is unlikely to raise interest rates again in 2019, which should help keep gold relatively cheap. Gold’s resilience on Tuesday was interpreted as an investor fear of a trade war.