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Gold Gained Among Evergrande Fears, and Market Pending the Fed

Gold Gained
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EDITOR NOTE: The ongoing collapse of Evergrande, the second-biggest property developer in China, is sending shock waves around the global economy. Director of metals trading at High Ridge Futures David Meger told CNBC that “recent concerns about global economic growth, or more specifically, a Chinese economic slowdown,” is driving up the price of both gold and gold futures. Gold gained 0.7% and futures were up 0.8% as the Evergrande crisis worsens. These concerns, combined with changes in central bank policies and rising inflation, are pushing people toward safe-haven assets such as gold and silver, which is also up $1.3%. 

Gold gained on Tuesday as unease over China’s Evergrande insolvency spurred safe-haven buying, ahead of a Federal Reserve meeting that could provide clues on the central bank’s timeline for cutting its stimulus to the U.S. economy.

Safe-haven asset gold has gained on “recent concerns about global economic growth, or more specifically, a Chinese economic slowdown,” which are enough to outweigh a recovery in equities, said David Meger, director of metals trading at High Ridge Futures.

Spot gold was up 0.7% at $1,776.09 per ounce by 1:59 p.m. ET, while U.S. gold futures settled 0.8% higher at $1,778.20.

However, the technical picture for gold “remains near-term bearish,” said Jim Wyckoff, senior analyst at Kitco Metals.

“We may be seeing shorter-term futures traders that have been short maybe evening up and doing some short covering ahead of the FOMC.”

Positive influences from a slip in the U.S. dollar and gains in crude prices were also lifting bullion, Wyckoff said.

The Federal Open Market Committee will release a policy statement and new economic projections at the end of its meeting on Wednesday. Some analysts believe it could announce the start of the tapering of its asset purchases in the fourth quarter, which could push gold lower.

Reduced central bank stimulus and interest rate hikes tend to lift bond yields, raising the opportunity cost of holding non-interest bearing gold.

“The big question that needs to be answered is will the current market uncertainty change any prospective timeline that the Fed might have when it comes to announcing its tapering of asset purchases,” said Michael Hewson, chief market analyst at CMC Markets UK.

Silver rose 1.3% to $22.54 per ounce.

Auto-catalyst platinum climbed 4.7% to $953.48, which Meger said was tracking a rebound in equities as a sign of potential economic growth, while palladium gained 1.6% to $1,916.67.

Original post from CNBC

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