Is gold’s sell-off a warning?
The US dollar was moderately higher overnight, but market focus was more on the precious metals space as gold and silver extended this week’s sell-off.
Gold had fallen as much as 3.0% overnight before later recovering. Gold finished down 0.7%. This followed Tuesday’s 5.6% fall – the biggest one-day drop since 2013. Silver was also lower.
The sell-off in metals markets sparked fears of a broader reversal, with US shares – now up almost 40% from their April lows – notably vulnerable.
The US’s Dow Jones fell 0.7% overnight, S&P 500 lost 0.5%, while the tech-focused Nasdaq dropped 0.9%.
FX pauses as metals steal focus
With the lustre of gold and silver capturing the market’s attention, FX markets took a back seat.
The AUD/USD was flat and remains mostly capped by short-term resistance up at 0.6525.
The NZD/USD also ended flat but remains stuck in a clear downtrend, with short-term price action capped at 0.5760.
We saw the same story in Asia, with USD/CNH also steady for the session, but USD/SGD bucked the trend with a wholly unremarkable 0.1% fall.
PMIs to break the data drought
Financial markets have suffered a virtual drought of financial data as the US government shutdown stretched into day 22 – the second-longest shutdown ever.
However, today sees a quick burst of global data, with the purchasing manager index numbers released in key markets including Australia, Japan, Europe and, importantly, the US.
Despite the to-ing and fro-ing over trade, PMI numbers have improved in the second half of the year. Remarkably, global manufacturing numbers are near three-year highs, helped by recoveries in US and German manufacturing.
Improving PMI numbers are usually a positive sign for global growth and commodity currencies like the AUD.
Aussie remains pressured in most markets
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 20 – 25 October
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
