In a single day, gold and crude oil swapped roles. Yesterday, hopes for peace talks were in the driver’s seat: Brent crude plunged 7.63% in a day, West Texas Intermediate fell 7.36%, and gold climbed 1.9% on the back of it. Today, the mood shifted. The U.S. military carried out a limited, so-called “defensive strike” on Iran’s Qeshm Island in the Strait of Hormuz, sending oil prices bouncing back while gold and silver plunged across the board. Spot gold fell below $3,950 to $3,916.55, down 0.76%. Spot silver slid more than 3%, falling below $50 to $49.12. Brent crude neared $105 and WTI returned to around $97.50, both up about 1%.
The chain of events is straightforward: geopolitical risk premium moved between oil and gold. When hopes for peace talks emerged, the “war premium” in oil was stripped away first, sending prices tumbling. Meanwhile, safe-haven buying picked up in gold, pushing prices higher. Once the limited strike took place, that premium flowed back into oil, and safe-haven buyers in gold immediately pulled their orders. The same geopolitical risk lifted gold yesterday and oil today. Which one rises depends on what the market fears more at the time: fears of supply disruptions lift oil; fears of escalation lift gold.
But more important to watch than one day’s gains and losses is the shift in what’s driving gold prices this year. At the start of the year, gold surged to a record high of more than $5,500 an ounce. It has since fallen more than 8% this year, dropping below $4,000. It fell 6.8% in October alone, and briefly dropped below $3,900 on October 30, hitting a new low for the year. The Relative Strength Index (RSI, a measure of the strength of price moves, with lower readings indicating heavier selling) had already entered oversold territory last week. The sharp drop on October 30 is even more telling: it wasn’t that nobody wanted gold. When liquidity is tight, investors sell the easiest assets to convert into cash first—turning a safe-haven asset into an ATM.
Put simply, gold hasn’t stopped being a safe haven this year; what’s changed is the weighting of the factors that determine its price. “Safe-haven demand” has taken a back seat to “liquidity” and “interest rates.” The 10-year U.S. Treasury yield is still elevated at around 4.9%, so the opportunity cost of holding non-yielding gold hasn’t come down. In the short term, the RSI’s oversold reading could trigger a technical rebound at any time. But for a reversal, at least one of two signals is needed: either the U.S. and Iran reach a deal and oil prices fall further, thoroughly dampening inflation expectations; or the U.S. midterm election results come in and risk appetite is repriced.
There’s another divergence that’s easy to overlook: gold on the Shanghai Gold Exchange’s T+D contract closed up 0.19% today at 840.16 yuan per gram, while silver T+D fell 1.33%. Domestic gold prices didn’t fall alongside international prices. This divergence between domestic and overseas markets suggests local buying remains resilient, and that the latest sell-off in international gold prices is driven more by deleveraging among overseas investors.
There are three risks to watch. First, voting in the U.S. midterm elections takes place today, with a record 50 million people having already voted early. The results won’t become clear until Wednesday’s Asian trading session, so gold prices tonight will still sway with election expectations. Second, the U.S. Department of Labor will release September job openings data tonight. If the labor market is overheated and rate-hike expectations return, gold could take another hit. Third, the strike on Qeshm Island was only “limited.” If the conflict escalates, oil and gold could rise together, and today’s “oil up, gold down” dynamic could reverse at any moment.
With gold below $4,000, both bargain hunters and bears think they’re right—and when disagreement is greatest, a market reversal is often closest.
#黄金 #U.S. stocks
The chain of events is straightforward: geopolitical risk premium moved between oil and gold. When hopes for peace talks emerged, the “war premium” in oil was stripped away first, sending prices tumbling. Meanwhile, safe-haven buying picked up in gold, pushing prices higher. Once the limited strike took place, that premium flowed back into oil, and safe-haven buyers in gold immediately pulled their orders. The same geopolitical risk lifted gold yesterday and oil today. Which one rises depends on what the market fears more at the time: fears of supply disruptions lift oil; fears of escalation lift gold.
But more important to watch than one day’s gains and losses is the shift in what’s driving gold prices this year. At the start of the year, gold surged to a record high of more than $5,500 an ounce. It has since fallen more than 8% this year, dropping below $4,000. It fell 6.8% in October alone, and briefly dropped below $3,900 on October 30, hitting a new low for the year. The Relative Strength Index (RSI, a measure of the strength of price moves, with lower readings indicating heavier selling) had already entered oversold territory last week. The sharp drop on October 30 is even more telling: it wasn’t that nobody wanted gold. When liquidity is tight, investors sell the easiest assets to convert into cash first—turning a safe-haven asset into an ATM.
Put simply, gold hasn’t stopped being a safe haven this year; what’s changed is the weighting of the factors that determine its price. “Safe-haven demand” has taken a back seat to “liquidity” and “interest rates.” The 10-year U.S. Treasury yield is still elevated at around 4.9%, so the opportunity cost of holding non-yielding gold hasn’t come down. In the short term, the RSI’s oversold reading could trigger a technical rebound at any time. But for a reversal, at least one of two signals is needed: either the U.S. and Iran reach a deal and oil prices fall further, thoroughly dampening inflation expectations; or the U.S. midterm election results come in and risk appetite is repriced.
There’s another divergence that’s easy to overlook: gold on the Shanghai Gold Exchange’s T+D contract closed up 0.19% today at 840.16 yuan per gram, while silver T+D fell 1.33%. Domestic gold prices didn’t fall alongside international prices. This divergence between domestic and overseas markets suggests local buying remains resilient, and that the latest sell-off in international gold prices is driven more by deleveraging among overseas investors.
There are three risks to watch. First, voting in the U.S. midterm elections takes place today, with a record 50 million people having already voted early. The results won’t become clear until Wednesday’s Asian trading session, so gold prices tonight will still sway with election expectations. Second, the U.S. Department of Labor will release September job openings data tonight. If the labor market is overheated and rate-hike expectations return, gold could take another hit. Third, the strike on Qeshm Island was only “limited.” If the conflict escalates, oil and gold could rise together, and today’s “oil up, gold down” dynamic could reverse at any moment.
With gold below $4,000, both bargain hunters and bears think they’re right—and when disagreement is greatest, a market reversal is often closest.
#黄金 #U.S. stocks