Gold: "First corrections"

Profit-taking ends price rally

In the precious metals markets, and especially in gold, many short-term investors and trend followers have jumped on the bandwagon in recent days, as prices seemingly stormed ever higher. However, on Friday evening and especially yesterday, Tuesday, there was massive profit-taking, sending prices into a tailspin. There are other reasons for a short-term price setback:

• The belief is taking root in the financial markets that the planned meeting between US President Trump and Chinese President Xi is likely to find a solution to the trade conflict between the two countries, which is why “safe haven” positions in gold have been liquidated.
• Gold and silver benefited significantly from rising demand from India in the run-up to the Diwali festival. In September, India's gold imports from Switzerland increased by 97 percent to 30 tons compared to the previous month.
• Due to the government shutdown, no data on investors' current positioning on futures exchanges is currently being published in the US. The last available data at the end of September indicated a high level of buy positioning among speculatively oriented market participants – and this has likely been further expanded. These positions are often short-term in nature and therefore subject to immediate profit-taking.

Gold continues to trade above $4,000

While gold prices were still trading at $4,232 per ounce on Thursday morning last week, as I wrote this, they initially continued to rise to just under $4,380 in Asian trading on Friday. However, the first price setback to $4,186 followed immediately. On Monday, the yellow metal resumed its record-breaking run, climbing to a new all-time high of $4,381.50. A sharp correction occurred on Tuesday, causing gold prices to fall to $4,005 this Wednesday morning. However, the round mark was then defended, and as I wrote this on Wednesday at 9 a.m., gold prices are trading at around $4,130.

The Xetra Gold price also showed stronger price fluctuations

During regular trading hours, prices initially climbed from €116.70 per gram on Thursday morning last week to a record high of €119.75 on Friday morning. After a drop to €116 on Friday, prices reached a new high of around €120.05 at the close of trading on Monday. Yesterday, prices then fell back to €113.40. This morning (Wednesday), Xetra Gold is expected to start trading at around €114.80.

As "feared" here last week, the gold market was recently overbought in the short term, so the current correction could be healthy for the market in the medium to long term. Data on US consumer prices for September will be released on Friday, which could potentially trigger a stronger market reaction if they deviate significantly from expectations...

I wish all readers a relaxing weekend – and don’t forget to set the clocks back.