Gold is at its height in 2019 as talks between the United States and China are about to be reopened by Investing.com

By Barani Krishnan

Investing.com – Gold has fallen the strongest of its life in 2019, as the yellow metal had discovered Thursday how quickly US-Chinese rhetoric could swing in the other direction.

, reflecting bullion trading, was trading at $ 1,518.52 per ounce at approximately 2:45 pm ET (6:45 pm GMT), down from $ 34.06, or 2.2%, following news reports that United States and China agreed new trade negotiations in October. This was the highest percentage drop of the year.

Bullion increased in the previous session to $ 1,557.09, the highest level since April 2013.

for December deliveries, settlement of $ 34.90, or 2.2%, at $ 1,525.50 per ounce on the Comex division of the New York Mercantile Exchange. In Wednesday's session, December's gold reached a record $ 1,566.15 in six years.

The last time gold futures were so down was a drop of 2.4% in January.

For weeks, investors have accumulated gold and have been pushed to buy bullion by the central bank in the context of the global downtrend in interest rates. The intensification of hostilities between the United States and China, driven by their tariff war, also led to widespread risk aversion that weighed on US bond yields, resulting in increased coverage of the shelters.

On Thursday, however, the rhetoric of the trade war suddenly turned, with both parties seeming to establish at least a temporary peace before the negotiations scheduled for October.

"The recent wave of risk taking also has the potential to weigh more heavily on precious metals, while gold prices are struggling to keep the trend on the rise," said TD Securities in a note. "If the positive commercial securities were to regroup, we could well see the precious metals complex consolidate lower, especially given that the other risks of events have somewhat simmered, in anticipation of different meetings of the central bank. in September."

Much remains to be done for gold to become more aligned with the potential for darker global data. It is currently up about 20% a year, fueled by fears over the trade war and the possibility that the world is plunging into recession.

Gold needs to rise about 25% more to be able to rewrite unprecedented highs of more than $ 1,900 in 2011, a probability some are betting on.

This objective could be more easily achieved if the Federal Reserve set its major federal funds by an additional 25 basis points at its September 17-18 policy-making meeting. The Fed lowered the rate to a similar level in August. Lower interest rates tend to support gold by reducing the yield on bonds, which compete for the capital of risk-averse investors.

The Investing.com Fed rate tracking tool has a 95% chance that the rate will drop to 1.75% to 2%.

However, TD Securities said it was not sure the Fed was getting another rate cut.

"S & P falling only a few points from its highest points, the financial conditions have not tightened significantly, which could embolden the Fed to disappoint the expectations of the market in reducing rates", a- he declared.