Gold steadied after a three-day selloff, with buyers buying the dip ahead of an expected interest-rate cut by the US Federal Reserve.
Gold prices held near $3,950 an ounce, after losing more than 4% over the prior three sessions. Spot gold was steady at $3,950.66 an ounce at 10:35 am in Singapore. The Bloomberg Dollar Spot Index was up 0.1%. Silver rose for a second day, while platinum and palladium both fell.
Investors are pricing in a second straight US Fed rate cut—seen at 25 bps—although Chair Jerome Powell is unlikely to offer much forward guidance. The lower borrowing costs tend to benefit non-interest bearing precious metals.
One basis point (bps) is one-hundredth of a percentage point.
Gold has retreated sharply following a torrid rally that drove prices to a record above $4,380 an ounce last week. Technical indicators had shown the ascent had run too far, too fast—a move that coincided with reduced demand for havens amid signs of progress in US-China trade relations.
With Donald Trump and Chinese counterpart Xi Jinping due to meet on Thursday, the US president talked up the prospects for their summit, telling reporters he expects that there will be “a very good outcome for our country and for the world”.
Even after the pullback, the metal is still up about 50% this year, supported by central-bank buying and the so-called debasement trade, in which investors avoid sovereign debt and currencies to protect themselves from runaway budget deficits.
The surge had drawn institutional and retail buyers to Gold ETFs—although outflows this week have dented some of that support. Investors withdrew a net $1 billion from State Street’s SPDR Gold Shares on Monday, the most since April, according to data compiled by Bloomberg. The outflow came as total investor holdings of gold ETFs fell the most in six months.
“Gold’s role as a portfolio hedge against fiscal and policy uncertainty remains undiminished, though short-term exuberance has clearly given way to consolidation,” Christopher Wong, currency strategist at Oversea-Chinese Banking Corp., told Bloomberg News. “If we manage to consolidate in this range of $3,920-$4,020 an ounce, then it may set the stage for base-building before the next leg higher. But failure to hold here, could imply another flush out of longs.”
Gold’s rapid rise—and recent retreat—has been a hot topic at the London Bullion Market Association’s precious metals conference in Kyoto, Japan, this week. The overall mood remained buoyant, with a survey of 106 attendees projecting that gold would trade at nearly $5,000 an ounce in a year’s time.