Gold price is in positive territory but Evergrande is unable to find a major safe haven as the threat of default increases. The Dow Jones Industrial Average started the new trading week down more than 500 points amid growing fears that a Chinese real estate giant might not be able to meet its debt obligations this week. Detail Cryptocoin. com
Gold price and China
Evergrande has been scrambling to find money to pay its bondholders, as an $83.5 million interest payment arrived Thursday. The company will make another $47.5 million payment next week. According to many analysts, the fear of default in China could spread to the rest of the world. Despite these growing fears, the gold market is receiving only modest interest as prices remain well below $1,800 an ounce. December gold futures are latest, 0% for the day. It traded at $1,762.20 an ounce, up 62 percent.
“Gold is not attracting as much support as expected from softer returns and falling stocks,” said Marc Chandler, managing director of Bannockburn Global Forex. Bart Melek, head of commodities strategy at TD Securities, said gold isn’t getting much attention because investors are more interested in holding cash before a potential liquidity crisis. Despite the US dollar falling from a four-week high, it continues to show strength with resistance. The US dollar index was last traded at 93.19 points, relatively unchanged on the day. “Investors seem to be accumulating cash, and while at the end of the day gold is a safe-haven asset, the U.S. dollar is not,” Melek said. Melek added that despite increasing liquidity problems in Chinese markets, investors in North America are still focused on the Federal Reserve and a possible change in monetary policy.
The US central bank will hold its two-day monetary policy meeting on Tuesday and Wednesday. Ahead of the monetary policy decision, there are expectations that the Federal Reserve will release a plan to reduce monthly bond purchases. Melek said that he does not expect the Fed to publish any plans, but that the thought of a plan coming is enough to weigh on gold in the short term.
Ole Hansen, head of commodity strategy at Saxo Bank, also said that US monetary policy has a greater impact on the gold market than stock market volatility. Hansen: “There is a perception in the market right now that the next big move in yields and the dollar are both upside. “Until that view changes, gold has stopped working to attract renewed demand,” he said. Hansen added that despite an imminent liquidity crisis, sentiment in the gold market is on a downward trend as fiyadollarsar failed to hold above critical resistance points.
SIA Wealth Management chief market strategist Colin Cieszynski said gold hasn’t seen much action, in part because investors don’t yet know how big an impact the Evergrande default will have for the global. Strategist said:
Some investors may feel that any fallout from Evergrande could be contained in China and China-sensitive markets. Gold is up a bit, but not as much as expected on a day when investors are taking a more defensive stance.