Gold and silver have stumbled to start the week, with October gold futures falling below $1800 and September Comex silver futures down $0.44.
The stumble is likely due to sluggish economic data coming from China, which has added to fears of a global economic recession. China has been hobbled by COVID lockdowns and reduced demand in commodities, including precious metals.
“Gold is struggling to shine this morning amid a stabilizing dollar and concerns over China’s physical demand for the precious metal in the face of slowing economic growth,” said Lukman Otunuga, senior market analyst at FXTM to CNBC.
The United Kingdom’s July inflation numbers are top of mind, as investors see potential for more bleak global economic news. Rupert Rowling, a market analyst at Kinesis Money said that what happens in the U.S. is a much bigger driver for gold, noting that “the actions of the Federal Reserve far outweigh the Bank of England when it comes to the impact on gold prices.”
Domestic news is also dinging the yellow metal, with New York State Manufacturing data adding to concerns. “The US Empire data was rotten, and it has reminded the Fed that they need to be extra careful with their monetary policy as the US economy has applied an emergency brakes,” said Naeem Aslam, chief market analyst at Ava Trade.
Gold continues to contend with a stronger dollar, making it more expensive for buyers, but the long-term prognosis for the yellow metal remains solid. In times of uncertainty, investors tend to look to gold as a store of value. Though the yellow metal has faced a myriad of unusual headwinds this year, its historic ability to perform in the second half of an inflationary period could mean the long overdue breakout is coming. Sprott’s Paul Wong recently noted in a recent insight that “The recession shock and its associated risks have yet to be fully priced, and we would expect buying in gold to resume along with a short covering.”
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