Gold Price Rebounds Sharply as Stock Rout Boosts Haven Demand

Gold rebounded sharply on Thursday, as traders returned to the relative safety of precious metals following the worst stock rout since February. U.S. equity markets appear to have stabilized by mid-morning, though downside pressure is likely to persist.

Gold Regains $1,200

Precious metals rose across the board Thursday, with gold futures returning above $1,200 for the third time in the last four weeks. December gold, the most actively traded futures contract, jumped $24.20, or 2%, to $1,217.70 a troy ounce on the Comex division of the New York Mercantile Exchange. That’s the highest since August.

Comex silver futures notched gains of 21 cents, or 1.5%, to trade at $14.54 a troy ounce.

The gold/silver ratio that is used by investors to determine when to buy and sell precious metals widened to 83.84 on Thursday. This essentially means that 83.84 ounces of silver at spot price are needed to purchase one ounce of gold. The ratio is down 1.5% over the past month but has risen by more than 5% over 60 days.

Industrial metals were also trading higher on Thursday, with copper futures climbing $1.45, or 0.5%, to $279.50 a pound.

The U.S. dollar, which often trades inversely with precious metals, declined 0.3% against a basket of major currencies. The dollar index is currently valued at 95.25.

China Leads Stock-Market Selloff

A sharp and sudden selloff on Wall Street Wednesday ignited a panic sale in global markets, with all major indexes in Europe and Asia reporting heavy declines. Asian markets were the heaviest hit, with Chinese stocks shouldering massive losses.

The mainland’s CSI 300 Index plunged 4.8% to 3,124.11, the lowest in two-and-a-half years. China’s benchmark Shanghai Composite Index sold off 5.2% to close at 2,583.46.

Chinese markets have been under heavy selling pressure since Monday as traders returned from Golden Week celebrations to find dismal economic data, rising U.S. government bond yields and what many believe is an ineffective response from the central bank to ease capital restrictions.

U.S. President Donald Trump and Chinese counterpart Xi Jinping are planning to meet at the upcoming Group of 20 summit in Buenos Aires, Argentina at the end of November. Both countries are locked in a bitter trade dispute, with the U.S. levying tariffs on some $250 billion in Chinese imports. Negotiators had planned more fruitful dialogue in September before the Trump administration moved ahead with new tariffs.

The International Monetary Fund (IMF) has warned that a prolonged trade dispute between the superpowers threatens to undermine global economic stability. The Washington-based lending institution downgraded its 2019 outlook for both countries and the global economy as a whole.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi