PAUL FAITH / AFP
Gold futures rallied back to their highest level in more than six years on Tuesday, as a decline in August U.S. manufacturing contributed to worries about the domestic economy.
Trade-related tensions, global growth concerns and the threat of the market being roiled by a disorderly exit by Britain from the European Union also drew investors to the haven metal.
The Institute for Supply Management’s manufacturing index fell to 49.1% in August from 51.2% in July. Any reading below 50% indicates worsening conditions. This is the first contraction in 35 months.
“This should give further justification towards [a Federal Open Market Committee] rate cut, anticipated in September,” said Jeff Wright, executive vice president of GoldMining Inc.
“Traders are pointing to [the] ISM being weak as another reason to increase gold exposure,” he said. However, overall, economic data was mixed, with U.S. construction spending edging up by a seasonally adjusted 0.1% in July, and the August PMI manufacturing number was positive, he said. “So the economic data was a bit mixed.”
Gold for December delivery added $26.50, or 1.7%, to settle at $1,555.90 an ounce on Comex—the highest finish since April 2013, according to FactSet data. That was the first gain for the most-active contract in four sessions. It finished last week down 0.5%, but 6.3% higher in August.
December silver jumped 89.5 cents, or 4.9%, higher to end at $19.237 an ounce. That was the highest most-active contract settlement since September 2016. Silver stole gold’s thunder in August, logging a nearly 11% rise.
“I am looking for silver to still play catch up to gold, but [it would also] see a sharper decline on any pullbacks over next month or so,” said Wright.
Meanwhile, legislation seeking to delay the date of the U.K.’s departure from the EU is set to be put forward in Parliament later Tuesday. If the bill goes through, U.K. Prime Minister Boris Johnson is expected to respond by pushing for a general election on Oct. 14.
Also on Monday, Bloomberg News reported that the U.S. and China were struggling to reach an agreement on a schedule for trade talks, signaling that a trade resolution remained uncertain.
Gold and precious metals broadly have benefited from investors’ fear that a litany of problems across the globe, including Brexit and trade wars, could disrupt markets and world-wide economies.
‘If gold demand and prices offer a barometer of fear, then Western investors and savers suddenly see a heap of trouble ahead.’
Adrian Ash, BullionVault
“If gold demand and prices offer a barometer of fear, then Western investors and savers suddenly see a heap of trouble ahead,” said Adrian Ash, director of research at BullionVault.
More private investors bought gold last month than any time since Donald Trump won the U.S. presidency almost three years ago, according to data from physical gold trading platform BullionVault released Tuesday. BullionVault’s Gold Investor Index, which offers a measure of investors’ “self-directed” sentiment towards physical gold, based solely on actual trading behavior, rose to an 11-month high in August to 55.0, from 52.6 in July.
“First-time buyers are leading this jump in gold demand, with August bringing the most new investors to bullion in more than six years,” Ash told MarketWatch.
Later this month, Wall Street investors are expecting the Federal Reserve’s rate-setting FOMC to reduce benchmark interest rates by a quarter of a percentage to combat the harm from the Sino-American trade conflict on the global economy.
“Gold has remained resilient in the face of the stronger dollar. However, given this week’s economic calendar is jam-packed with crucial economic releases that will shape monetary policy expectations for the September 18 FOMC meeting, gold traders are trading very delicately waiting for more convincing U.S. economic signals,” wrote Stephen Innes, an independent market strategist, in a daily research note.
Among other metals, December copper fell 0.9% to $2.528 a pound, the lowest for a most-active contract since May 2017, FactSet data show.
“Demand destruction selling of copper has returned with a vengeance,” said analysts at Zaner Metals, in a note Tuesday. “While some economists have pegged Chinese growth to come in at 5.7%, traders view the Chinese economy to be facing a number of threats in the form of trade and political unrest.”
October platinum tacked on 2.6% to $955.60 an ounce, but December palladium settled at $1,535.20 an ounce, down 0.3%.