Gold Prices Approach Three-Month Highs as Fundamental Risks Weigh

The price of gold continued higher on Tuesday, as the combination of rising interest rates, looming U.S. midterm elections lifted demand for safe havens. However, upside could be capped by rebounding stock prices as U.S. markets opened sharply higher. The yellow metal has rebounded 4% over the past eight days.

Precious Metals Rise

Precious metals were higher across the board, with gold futures resuming their climb above $1,230.00. December gold, the most actively traded futures contract, rose $4.90, or 0.4%, to $1,235.20 a troy ounce on the Comex division of the New York Mercantile Exchange.

Silver futures followed a similar trajectory, rising 10 cents, or 0.7%, to $14.83 a troy ounce, the highest since Aug. 28.

The U.S. dollar, which often trades inversely with precious metals, declined for a fifth time in six sessions. The dollar index fell 0.2% to 94.86, a new three-week low.

Fundamentals in Focus

Rising bond yields have put a damper on risk appetite in global stocks, helping to engineer one of the biggest declines of the year. In China, equity markets are down a whopping 23% this year, with the latest selloff only exacerbating a volatile climate for investors. The benchmark Shanghai Composite Index fell a further 0.9% on Tuesday.

China is at the center of a global trade controversy after U.S. President Donald Trump invoked heavy trade tariffs on the country. Last month, the Trump administration implemented additional duties of 10% on $200 billion of Chinese goods. Although Beijing has responded, its massive surplus with the U.S. means it won’t be able to match Trump’s tariffs dollar-for-dollar. The International Monetary Fund (IMF) expects trade hostilities will contribute to slower economic growth in the U.S., Chinese and global economies next year.

Europe is also in the spotlight as investors await the details of Italy’s forthcoming budget. Rome’s new government on Tuesday submitted its budget to the European Union for review. The plan reportedly pushes Italy’s deficit to 2.4% of GDP, which is well above the EU’s guidelines and sets the stage for further clashes with Brussels.

Meanwhile, U.K. Prime Minister Theresa May has called for political unity after securing the backing of cabinet for her Brexit negotiating strategy. May is expected to press EU leaders to unblock stalled negotiations after European lawmakers ditched plans to publish a draft declaration on the bloc’s future trade deal with the United Kingdom.

Wall Street Opens Higher

U.S. stock markets were trading higher after the opening bell on Tuesday, with technology shares leading the rally. The large-cap S&P 500 Index was up 0.7%, with all 11 primary sectors reporting gains. The tech-heavy Nasdaq Composite Index shot up 1.1%. Dow industrials rose more than 200 points.

U.S. equities faltered Monday afternoon after a back-and-forth session. The major indexes are coming off their worst week since February with losses ranging from 3.7% to 4.2%. The selloff triggered a massive spike in volatility, with the CBOE VIX reaching six-month highs.

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