Gold falls again as rally comes to halt, stock markets mixed

Gold and silver sank for a second day on Wednesday (Oct 22), bringing a rally in the precious metals to a juddering halt, while stocks were mixed after United States President Donald Trump remarked that a meeting with Chinese counterpart Xi Jinping might not take place.

Bullion has seen an eye-watering run-up since the turn of the year, helping it climb more than 60 per cent and hitting multiple records, with observers suggesting it could soon hit US$5,000 an ounce.

The rally has been built on a range of issues including a weaker dollar, expectations of interest rate cuts, falling bond yields and central bank buying.

Lingering worries about the global outlook have also boosted its haven status, while a fear of missing out on the surge has equally played a part.

But the buying reversed Tuesday, tanking as much as 6 per cent at one point, and continued its retreat in Asia, hit by profit-taking, hopes for a further easing of China-US tensions and a stronger dollar.

At one point on Wednesday, it hit a low of US$4,000 - a day after chalking up a record peak of US$4.381.51. Silver, which has been riding the coattails of the rally, also plunged.

The retreat hit gold miners and producers. Northern Star Resources in Sydney dived more than 8 per cent, with Perseus Mining losing more than 6 per cent.

And Hong Kong-listed Zijin Gold International shed more than 4 per cent and Shandong Gold Mining was off nearly 2 per cent, while Merdeka Copper Gold dived around 4 per cent in Jakarta.

“Gold’s glorious charge finally met gravity. After months of one-way conviction and relentless inflows, the metal took a 6 per cent cliff dive,” said Stephen Innes at SPI Asset Management.

“Volatility in gold has now surpassed equities, echoing the pandemic’s manic heartbeat,” he said.

However, he added that the commodity would likely still retain support among investors.

“Beneath the surface, the structural demand for insurance remains.

“Central banks will keep stacking reserves, investors still question the durability of fiat promises, and the monetary plumbing remains swollen with debt and distortion.”

Charu Chanana of Saxo Markets added: “None of this means the precious metals story is over. In fact, these are healthy developments, helping to cool what had become an overheated trade and preventing the rallies from turning into a bubble.”

The selling matched losses in equities, with most Asian markets falling following two days of strong gains.

While investors were taking a breather from the latest run-up - fanned by hopes for a thawing of relations between Beijing and Washington as well as rate-cut bets - comments from Trump raised eyebrows.

The US president said Tuesday he expected to seal a “good” trade deal with Xi at the APEC summit in South Korea next week, saying that “I think we’re going to have a very successful meeting. Certainly, there are a lot of people that are waiting for it”.

But he then added: “Maybe it won’t happen. Things can happen where, for instance, maybe somebody will say, ‘I don’t want to meet. It’s too nasty.’ But it’s really not nasty.”

Hong Kong and Shanghai dropped along with Sydney, Wellington, Taipei and Manila, though Singapore, Seoul and Jakarta rose.

Tokyo ended flat, eroding early losses fuelled by profit-taking after a strong rally sparked by an end to political turmoil in Japan.

London opened on the front foot but Paris and Frankfurt edged down.

Oil prices jumped around 2 per cent on speculation that India will agree to cut its purchases of the commodity from Russia as part of a trade deal with the US.

Trump claims New Delhi has pledged to reduce its imports from Russia, which Washington says helps finance Moscow’s war in Ukraine.

Indian officials have neither confirmed nor denied any policy shift.

India is one of the world’s largest crude importers and relies on foreign suppliers for more than 85 per cent of its oil needs. It began buying heavily discounted Russian crude in 2022, taking advantage of Western sanctions that limited Moscow’s export options.

Source: AFP

- Agencies