Gold Trading | Is the movement in gold disastrous for the US economy?

The past few days Commodity Samachar has been reviewing the recent news relating to latest gold trading that’s been surfacing on the internet and several signs have led to ‘breadcrumbs’ that might be signalling something massive coming our way. 

With the War raging on and other factors in play, gold has seen a rise but the events that are occurring now might just add a little bit more pressure. 

Let’s dive into the scenarios that link to war’s impending doom coming America’s way with relation to the most recent gold trading sessions.

Gold Trading | Reports from Kahn Estate jewellers in the US: 

The US FED has been spreading positivity in the air concerning their outlook however the rising interest rates tell another story. 

Heading over to the US, the gold market has been serving as a great place of value as consumers have taken advantage of higher prices by casing in on broken jewellery. 

Tobina Kahn, the president of the House of Kahn Estate jewellers had mentioned that gold’s recent seven-month lows have prompted consumers to sell their old, broken jewellery. 

She said that the traffic in her shop is comparable to what she witnessed at the beginning of the year when gold rose above $2000 per ounce. However, Kahn noticed a difference. She said, “Consumers were selling old jewellery to raise funds to invest in the stock market, but now they are selling gold to make mortgage payments.”

There has been a considerable increase in the gold rates as geopolitical tensions in the Middle East rise, however, the conditions in the US have become so destitute that people are worried about their living expenses and the health of the domestic economy. 

She went on to explain that the Federal Reserve will be unable to control inflation as it chokes economic growth. She says that the customer sees the inflation signs in their grocery bills, petrol prices, mortgages and credit statements. “Regardless of what politicians or central bankers say, inflation is not going away anytime soon,” she said. However, she said on a positive note that Western consumers are finally releasing the value of gold. 

Although the Federal Reserve is confident that it can engineer a soft landing by lowering inflation to 2% many economists and market analysts still fear a recession incoming. 

Gold Trading | China’s dumping of US Assets to buy gold:

Switching from the ‘Wild West’, and broadening our perspective to China, there’s something interesting happening. 

Referring to an article from Kitco.com, traders got to see that China is dumping US Assets to buy gold. 

They have been selling off massive quantities of its US assets and see no choice but to reallocate funds to gold, according to Vladimir Zernov, Market Analyst at FX Empire. 

The observation was that the US Treasury data indicated that China was selling US Assets at a rapid pace. Several news sources rising throughout the internet say that “Some observers believe that China tries to provide support to its currency. However, China may be selling US Assets due to geopolitical tensions.”

Backing his claim, he referred to recent data from the US Treasury stating that Chinese investors sold $21.2 billion worth of U.S assets in August ” While FED policy outlook was the biggest driver behind the sell-off Treasuries, it looks like China’s activity contributed to the move that pushed the yield of 30-year Treasuries toward 5.00%”

Amidst this traders have been searching for safe-haven assets due to geopolitical tensions. Even though treasuries are considered to be among the safest assets in the world, their price has been falling for months and some investors may choose to buy gold”.

The trail does not stop there as recent gold purchase data supports the theory that China has been moving heavily into gold as they liquidate U.S. debt. As per the recent gold trading data, The People’s Bank of China(PBoC) has been buying gold at a rapid pace. By updated foreign reserve data, China’s Central Bank bought 29 tonnes of gold in August and it’s being seen as the Central Bank’s biggest purchase since December. 

Due to a high domestic gold price spike, the PBoC intervened in the market by banning banks from importing gold, which pushed the spread between the spot price of gold in Shanghai and London to record $121 per ounce in mid-September. 

Technical Insight from Commodity Samachar:

Here’s an interesting insight from Ankit Kapoor, Head of Research at Commodity Samachar. 

” The reason that these pairs of data are interesting is that they create a 2-way link that many people might not have noticed. In America, the jewellery owner has found that there’s a reverse sentiment while selling gold to the market for payment of mortgages, whereas, in China, US Assets are being dumped to buy gold. The outlook is that a certain level of trust in the strength of the US has been hindered and there are underlying issues that have not surfaced as of yet. 

Until now, the interest rates have not come down and have only risen to bring inflation down, however, the news of these issues, along with China and also concerning the War have set doubts in the minds of traders around the world. The pressure on the economy might create waves if the interest rates are raised during the FOMC conference that’s scheduled for November 2nd, thereby leading to spikes in the price of gold. More cues have to be analysed to be sure of the trajectory that’s incoming for commodities. “

Commodity Samachar
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