Gold Hits 1-Week Low in Tokyo-Led Stock Market Crash
Monday, 8/05/2024 15:07
GOLD PRICES sank on Monday, plunging to 1-week lows more than $100 below Friday's new record-high weekly finish as global stock markets crashed, starting with the worst-ever 1-day drop in Tokyo,
writes Atsuko Whitehouse at BullionVault.
Fixing at 3pm on Friday at $2469 per Troy – the 2nd-highest ever London daily benchmark price – after
new US data said unemployment is rising, gold bullion fell as far as $2364 before rallying to $2390 as European and then US stock markets plunged.
Gold priced in the Yen tumbled by 5.9% to a 4-month low of ¥10,840 per gram as the Japanese currency extended its surge from 4-decade lows to hit a 7-month high against the US Dollar on the forex market.
"Gold behaving as normal, which is to say that there has been liquidation in the face of equities weakness," says the latest daily gold-price and precious metals note from Rhona O'Connell at brokerage Stone X Group Inc.
Japan's stock market tumbled for a 3rd session on Monday after central bank in Tokyo raised overnight interest rates from zero for the first in 15 years.
Japan's benchmark Nikkei 225 share-price index dropped more than 13% in intraday trading, worse even than the "Black Monday" crash of 19 October 1987 and pushing its losses since this time last month to 25.7%.
"The only reason why the Japanese market is up so strongly in the last two years is
because the Japanese Yen has been very, very weak," says Kelvin Tay, regional chief investment officer at UBS Global Wealth Management, the world's largest wealth manager.
The Nikkei 225 index peaked in February, surpassing the record it set in 1989 before the financial bubble burst, while the Japanese yen tumbled more than 12% this year, reaching its weakest level since 1986 in July.
"Entering the Japanese market at this moment is akin to catching a falling knife," Tay continued.
Today's crash in Tokyo followed US megatech stocks extending their losses on Friday, pulling the Nasdaq Composite Index more than 10% below the new record high set barely 3 weeks ago.
The Nasdaq opened Monday 4.3% lower after data released at the weekend showed Berkshire Hathaway – the highly and repeatedly successful investment vehicle founded and run by Warren Buffett – taking profit in smartphone giant Apple (Nasdaq: AAPL) during the April-to-June quarter, cutting its shareholding in half.
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The benchmark S&P500 opened 3.5% lower, while the pan-European Stoxx 600 index traded 3.2% lower at its cheapest since February.
"Gold can do well
under some equity market volatility, not an equity collapse," says Nicky Shiels, head of metals strategy at Swiss bullion refining and finance group MKS Pamp.
Gold priced in Euros meantime dropped 3.5% to €2161 per ounce, while
the UK gold price in Pounds per ounce fell 2.7% to £1857.
"Traders increasingly believe the Fed has left it too late" to cut interest rates and avoid a recession, says derivatives platform Saxo Bank's commodity strategist Ole Hansen after last week's 'no change' decision from the Federal Reserve was followed by a surprise rise in US unemployment data.
Market positioning now puts the largest single probability for the Fed's September meeting on a half-point rate cut, leaping to odds of 97.5% from 74.0% in the last session.
Traders are also betting on an additional three quarter-point cuts to rates by the end of 2024, according to
the CME's FedWatch tool.
The
price of silver, which finds nearly 60% of its annual demand from industrial uses, plunged 5.8% to 3-month low of $26.93 per ounce.
Oil futures also extended losses on Monday after tumbling 3% in the previous session due to concerns over a recession in top consumer the United States, despite supply worries stemming from mounting tensions in the Middle East.
US Secretary of State Anthony Blinken told his G7 counterparts at the weekend that Iran and Hezbollah
could begin attacking Israel as early as Monday in retaliation for
last week's double assassination of Iran-backed military leaders, and Western governments increased their calls for citizens to leave Lebanon while commercial flights are still available.
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