Panic for Aussies who dove into gold as price crashes
There’s panic among Aussies who dove into gold in recent weeks following an incredible development overnight.
Aussies who bought into a staggering gold rush over the past few weeks will be in for a rude shock this morning, and they’ve been warned things could get even worse.
Lines had formed outside gold shops in the CBDs of several Aussie cities in recent weeks as many rushed to buy gold bars or sell jewelry in order to cash in on the metal’s rising price.
However, the price of gold has fallen almost seven per cent overnight — the biggest decline in more than 12 years — after reaching a record high earlier this week.
Gold dropped 6.8 per cent to USD$4082.35 per ounce. It reached peaked at $4381.52 on Monday.
The price of the metal started at $4371 per ounce on Tuesday (local time) and had climbed to $4396.60 before it fell.
Silver also tumbled more than eight per cent.
Gold prices tumbled on profit-taking after recent record highs for the precious metal, seen as a “safe haven” investment.
After warning everyday investors on Friday to “wait” before buying, billionaire investor Bill Gross — known as the ‘Bond King’ — said the metal is now “exhibiting characteristics of meme and momentum stocks.”
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Mr Gross, who co-founded PIMCO, told Business Insider that gold’s bull run has been driven as much by hype and speculation as by fundamentals, making it more volatile and prone to a devastating drop.
Other experts said historic price rise went too far, too fast.
“Gold has entered a zone of unsustainable advance,” analysts at Renaissance Macro Research wrote in a weekend note.
They said it was hard to tell when to take profits.
Different picture on Wall St
While gold suffered, most stock markets had extended gains on Tuesday amid improve market mood, signs China-US trade tensions were easing and as investors looked to corporate earnings.
President Donald Trump has struck a more conciliatory tone on trade ahead of a meeting with Chinese counterpart Xi Jinping at the APEC summit in South Korea next week.
He said he wanted a “fair” trade deal between the two superpowers and praised his relationship with President Xi.
President Trump also played down fears of a Chinese invasion of Taiwan, saying: “I think we’ll be just fine with China. China doesn’t want to do that.”
The remarks followed other positive comments at the weekend and helped push Wall Street higher on Monday, as the tech-led rally resumed.
Gold prices have sharply risen by some 60 per cent this year.
It has seen thousands of Aussies across the country in the last couple of weeks rush to bullion retailers to either stock up on or sell gold.
Stocks rise ahead of US-China meeting
On Wall Street both the Dow and S&P 500 climbed, while the tech-heavy Nasdaq dipped as more companies reported their earnings.
“The overarching point this morning is that the earnings news for the September quarter continues to be better than expected, and, most importantly, the guidance has been generally reassuring,” Briefing.com analyst Patrick O’Hare said.
“The fact that the market isn’t as expressive about those points this morning as one might expect is due mostly to that reality having been priced in to a large degree already.”
Shares in General Motors raced more than 15 per cent higher after the automaker reported better-than-expected profits and boosted some full-year projections based on lower tariff costs.
In Europe, the Paris stock exchange set fresh intraday and closing records, pulled higher by a nearly 20-percent gain for financial services firm Edenred after it reported better-than-expected sales.
Asia markets also posted gains, with Hong Kong and Shanghai closing up more than one per cent.
“The focus is now on US interest rate cuts, the new corporate reporting season, and US-China trade talks,” Russ Mould, investment director at AJ Bell, said.
Investors will look to US inflation figures due on Friday for further signals about the pace of the rate cuts.
Investors were back in a buying mood after last week’s ructions sparked by President Trump’s threat to hammer China with 100 per cent tariffs over its latest rare earth export controls.
In Japan, the yen weakened after Sanae Takaichi was appointed prime minister, which raised expectations for a slower pace of interest rate rises.
“Takaichi is expected to cut taxes and boost defence spending, she is also not a fan of interest rate hikes,” research director at XTB trading group, Kathleen Brooks, said.
Meanwhile gold and silver pulled back.
“The drop was always going to come, and some would argue what took it so long,” City Index and FOREX.com analyst Fawad Razaqzada told AFP.
“Multiple factors have come together all at once – from hopes that the US and China will agree to extend the trade truce, to a rebound in US dollar and an overall positive risk appetite,” he said.
The pound fell against the dollar on official data showing UK public borrowing reached a five-year high in September.
Meanwhile, here in Australia, the ASX is tipped to drop 0.4 per cent on opening.
-with AFP
