Will Gold collapse mark beginning of new bearish phase?

London-listed stocks have managed to buck the wider bearish trend seen throughout mainland Europe, with the FTSE 100 index gaining 0.7% while the DAX and CAC slipped. Chief amongst the winners are the banks, headed up by Barclays which announced quarterly share buybacks in their Q3 earnings report. However, the big news came in the form of the UK inflation report, with September headline CPI held at 3.8% y/y (vs 4.0% expected), while core eased to 3.5%. Crucially, with the monthly CPI metric coming in at 0%, the pace of inflation for the past five-months is consistent with a return to 2%. Unsurprisingly, we are seeing increased calls for easing from the BoE, with markets now shifting forward the timing of the next rate cut from February to December.  With much of the inflation problem attributed to government measures at their previous budget, we are thankfully seeing commentary around Reeves wanting to ensure household prices are reduced when she announces her November 26 Autumn statement.

Crude is pushing higher from five-month lows as geopolitics re-prices supply risk. The planned Trump–Putin summit has been put on ice after Moscow refused a Ukraine ceasefire, reversing expectations of a deal that could open up Russian oil to the world. Washington is simultaneously trying to squeeze Asian intake of Russian barrels, with President Trump continuing to claim India would curb purchases despite denials from New Delhi. Today sees the stockpile issue come back into the fore, with the latest inventory figures having seen a significant build over recent weeks.

Gold traders are desperately trying to gauge whether yesterday’s historical collapse was indicative of a new period of weakness or simply a case of blowing off steam after a dramatic surge into record highs. The 5–6% drop represented the sharpest one-day fall since 2013, but this came off the back of an incredible $400 rally in the space of a week. Ongoing themes around geopolitics, trade tensions, debt, dollar strength and haven demand means that there is always likely to be a concoction of factors for traders to consider. However, with the Trump-Putin meeting called off, and scepticism over the likeliness of a wide-reaching US and China trade agreement, there will likely be calls for gold to regain its upward momentum soon enough. ETF purchases and investor demand has overtaken jewellery over recent months, and the subsequent impact on volatility is clearly there for all to see this past week.