Rise of the Safe Haven: Gold Tops $1,500 for the First Time Since 2013
Gold’s safe-haven rally gathered pace on Wednesday, as the bullion price topped $1,500 a troy ounce for the first time in over six years. At the same time, the Dow Jones Industrial Average plunged another 500 points as the U.S.-China trade war continued to roil the financial markets.
Bullion was back on the offensive Wednesday, gaining as much as 2.2% in New York trading on the heels of another meltdown in the global financial system.
Gold for December delivery, the most actively traded futures contract, peaked at $1,517.70 a troy ounce on the Comex division of the New York Mercantile Exchange, its highest since May 2013. Gold was maintaining its heights at the time of writing, having gained $31.20, or 2.1%, to $1,515.40 a troy ounce.
The yellow metal is up 8.2% over the past month and 18.3% since the start of 2019.
Silver prices also rallied on Wednesday, with the September futures contract surging 57 cents, or 3.5%, to $17.02 a troy ounce. That’s the highest level in around 16 months.
Precious metals moved in the opposite direction of the U.S. dollar, which fell 0.2% against a basket of currencies. The DXY dollar index was last seen hovering around 97.40.
Global equity markets tumbled on Wednesday, as the flight to safety drove risk assets sharply lower.
The Dow Jones Industrial Average declined by as much as 589 points on Wednesday. As of 10:13 a.m. ET, the blue-chip index was off 365 points, or 1.4%, at 25,663.96. The declines virtually erase Tuesday’s relief rally.
The broad S&P 500 Index of large-cap stocks fell 1.1% to 2,848.90, with all 11 primary sectors reporting declines. Financials were the hardest hit, falling 2.8% as a sector. Energy stocks also fell 2.1% as a whole.
Meanwhile, the technology-focused Nasdaq Composite Index declined 0.8% to 7,774.21.
A measure of implied volatility known as the CBOE VIX rose sharply on Wednesday. VIX, commonly known as the “fear index,” added 12.3% to reach 22.65 on a scale of 1-100 where 20-25 represents the historic average. The volatility gauge spiked to yearly highs on Monday, gaining as much as 105% during the session.
The selloff was stoked by fears that China may let the yuan decline even further to combat President Trump’s tariff escalation. Bank of America Merrill Lynch warns that the yuan could weaken beyond 7.5 per U.S. dollar in the event of another tariff hike.
The yuan was allowed to drift beyond the 7 per U.S. dollar level on Monday for the first time in over a decade, prompting President Trump to declare China a “currency manipulator.”
Featured image courtesy of Shutterstock. Charts via Bloomberg and Yahoo Finance.