Eos Energy stock falls after Fuzzy Panda issues short report
- Gold prices extend losses as traders shift toward risk assets after upbeat trade news.
- Support at $4,000 remains key as investors test gold’s long-term bullish momentum.
- Focus now turns to US-China trade talks and central bank signals later this week.
- Looking for actionable trade ideas to navigate the current market volatility? Subscribe here to unlock access to InvestingPro’s AI-selected stock winners.
Gold prices fell more than 1.7% by mid-morning London trade and neared last week’s lows when prices ended 3.5% lower. That weekly drop meant that a run of 9 consecutive weekly gains came to an abrupt halt. Crucially, though, support at $4,000 held last week, and we closed some $100 above this key hurdle on Friday. That was the only silver lining in what otherwise was a brutal week for gold.
But the weaker start to today’s session suggests the selling might not be done, and we could yet see gold break that $4K handle, even if temporarily. But what about the slightly longer-term view? Well, not much has changed, as some of the prior factors supporting gold during its extraordinary rise remain relevant.
Why Are Gold Prices Down Today?
In part because of the continued selling from last week, after the metal ended a 9-week winning run last week. But more to the point, we saw a risk rally that saw S&P 500 future hit new record highs, reducing the appeal of haven assets, after Chinese and US trade negotiators have apparently had some progress in making a trade deal ahead of the Trump-Xi meeting later in the week when we also have several central bank meetings and earnings from tech giants.
Trump told reporters that “I really feel good” about a deal with China. It is possible that the deal will include China resuming soy purchases while also removing critical rare-earth magnets restrictions, and the US, for its part, walking back its latest 100% tariff threat.
But experts have warned that this won’t be enough to address the major issues surrounding national security, state subsidies, and tech competition. Let’s see how things will evolve, but for now, markets have taken the signs optimistically.
China’s Apparent Slowdown in Gold Buying
Adding to the downbeat sentiment on gold, there was an apparent slowdown in the PBoC gold buying at the end of Q3, judging by Hong Kong’s September net gold exports to China falling 17.6% month-on-month. While this was evidently a slowdown in buying, China still imported a good 22.047 metric tons of the shiny stuff from HK.
The continued buying suggests China is continuing to add to its reserve, although high prices are probably what caused them to slow down their purchases. Traders might see this as a sign of slowing demand, but let’s not make any hasty judgments by one month’s worth of data. The PBOC’s own net purchases data will come out in early November, so we will have a better idea then.
Looking Ahead: US-China Trade Talks and Central Bank Meetings
As well as the US-China trade talks, we have lots of central bank meetings to look forward to this week. Last week, expectations of further monetary easing rose, for example, from the Bank of England after weaker CPI data from the UK. A lot will also depend on the direction of the US dollar, which has also played its part in gold’s pullback, putting the Fed meeting into focus in mid-week.
Recently, the rebounding dollar has been making gold more expensive for international buyers, but if the greenback resumes lower again, then this negative influence will no longer be there. In terms of haven demand, while easing trade tensions between the US and China ahead of the Trump-Xi meeting has fuelled a recovery in risk appetite, hopes of a ceasefire and end to the Russia-Ukraine war have been dashed.
So, it is far too early to suggest that the longer-term bull trend has ended for gold, especially when you consider that many investors who missed out on the big rally may soon consider stepping in to buy the dip, which they may well have done already with gold bouncing from a key technical area.
The week ahead is full of central bank meetings, with the US-China trade talks likely to overshadow any rate decisions in terms of market impact. Still, should central banks turn more dovish, then that should be good news gold. The opposite if they appear more hawkish than expected.
Has the Trend Changed For Gold?
At its worst, gold was down about 8% last week before trimming those losses as the metal closed above $4100. This drop isn’t particularly dramatic in percentage terms, considering how much it has surged over the past few years. In the broader context, this looks more like a temporary setback. Still, the sharp nominal fall earlier in the week certainly caught attention.
The sell-off was driven by a convergence of several factors — optimism that the US and China might extend their trade truce (dampening safe-haven demand), a stronger US dollar, and a generally improved risk appetite. On top of that, investors — and possibly even central banks — likely took profits on long positions, while gold producers may have increased hedging to lock in exceptionally high prices for future deliveries.
Being a commodity, gold is also influenced by supply-side dynamics, which can amplify moves when prices shift sharply over a short period. The result was heavy selling within a compressed timeframe, leading to long-position liquidation — whether voluntary or forced.
The key question now is whether the worst of the selling is behind us or if more downside lies ahead. Much depends on whether gold can hold above the crucial $4,000 level; if it fails to do so, further liquidation may follow.
For now, this critical support level and the bullish trend line have held. Let’s see if gold bears will succeed this time around, with pricing pressing the trend line again at the time of writing.
If they manage to hold their ground here, then the focus will turn to resistance near $4200 – bullish if we can go back above that area later in the week.
***
InvestingPro provides a comprehensive suite of tools designed to help investors make informed decisions in any market environment. These include:
- AI-managed stock market strategies re-evaluated monthly.
- 10 years of historical financial data for thousands of global stocks.
- A database of investor, billionaire, and hedge fund positions.
- And many other tools that help tens of thousands of investors outperform the market every day!
Not a Pro member yet? Check out our plans here.
Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.