Stocks

Gold ends higher as global stocks tumble on ‘big risk-off trading day’ sparked by Evergrande

Gold futures ended higher on Monday for the first time in four sessions as global markets suffer significant declines on the back of a downturn in China’s property market.

“It’s a big risk-off trading day in the historically sometime-turbulent month of September for the stock and financial markets,” said Jim Wyckoff, senior analyst at Kitco.com, in market commentary. Chinese property developer Evergrande is “in big financial trouble and traders and investors are very worried about a contagion effect.”

Stock benchmarks, notably the Dow Jones Industrial Average DJIA, and the S&P 500 index SPX, saw sharp declines amid growing worries about the collapse of a Evergrande
3333,
-10.24%
,
which is saddled with some $300 billion in debt that could spillover into other parts of the global market. Hong Kong’s Hang Seng HK:HSI market declined 3% in Asian trade Monday.

December gold
GCZ21,
+0.09%

 
GC00,
+0.09%

rose $12.40, or 0.7%, to settle at $1,763.80 an ounce following declines in each of the previous three trading sessions. Bullion last week booked a weekly decline of 2.3%, marking the second straight weekly decline.

The Evergrande crisis also comes as the U.S. Federal Reserve has its two-day monetary policy meeting beginning Tuesday and ending Wednesday with a statement and press conference from Fed Chairman Jerome Powell. “The marketplace is wondering if a big sell off in global stock and financial markets early this week would affect the Fed’s discussion on the timing of tapering its bond-buying program,” said Wyckoff.

Prices for bullion have been under pressure in recent sessions as a result of strong economic data out of the U.S., which has supported the belief that the Fed will taper its $120 billion in monthly purchases of Treasurys and mortgage-backed securities before the end of 2021, which would influence trade in precious metals.

“Whether the current price reversal in gold is a bearish rally,” a short-term rise amid a bear market, or a “sustained trend reversal will be known only after the FOMC meeting this week, Chintan Karnani, director of research at Insignia Consultants, told MarketWatch.

“I expect the FOMC meeting to continue to suggest taper being dependent on overall U.S. economic performance, and not just jobs,” he said.

Karnani also expects a December taper to be confirmed in the FOMC meet on Wednesday. That move is “more or less factored in by gold traders,” so gold prices may rise if the Fed confirms a December taper, he said. 

Meanwhile, December silver
SIZ21,
+0.30%

 shed 13 cents, or 0.6%, to $22.20 an ounce, following a 6.5% weekly drop for gold’s sister metal on Friday. Most-active contract prices marked another finish at the lowest since July 2020, FactSet data show.

December copper
HGZ21,
+0.40%

lost 3.1% to $4.11 a pound, while October platinum
PLV21,
+0.61%

fell 3.4% to $899.20 as ounce.

December palladium
PAZ21,
+0.74%

settled at $1,865.20 an ounce, down 6% for its lowest finish since June 2020. On Tuesday, prices had settled at their lowest since July of last year.

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