Gold held down by yuan, yields Gold held down by yuan, yields Gold held down by yuan, yields

Gold held down by yuan, yields

Commodities 7 minutes to read
Ole Hansen

Head of Commodity Strategy

Summary:  While semi-industrial and industrial metals continue to show signs of recovering, the same can not be said about gold with the yellow metal glued to a tight range around $1,200/oz.

While semi-industrial and industrial metals alike continue to show signs of recovering, the same can not be said about gold. During the past month, traders have increasingly been struggling to find the right direction and a tight range has emerged during this time with gold glued to the $1,200/oz level, having closed within $2/oz on more than half of those days. 

Industrial metals as seen through copper recovered strongly last week when China promised tax cuts and increased spending in response to the escalating trade war. Such an announcement from the worlds biggest consumer of metals was then backed up by news that Chile’s state owned Codelco, the world’s biggest producer, was seeing rising demand and limited supply. 

Following last week's strong recovery, HG Copper is now facing a band of resistance between $2.87 and $2.97/lb, the equivalent of $6,400 and $6,600/MT on LME Copper.

Source: Saxo Bank

The tailwind from industrial metals has allowed both silver and platinum to recover both in real terms and relatively against gold. The gold-silver ratio has fallen to a three-week low, and is now below 83 from a 10-year high above 85. Platinum, meanwhile, has outperformed gold by more than $50/oz since July 2 and is currently trading at $370/oz, a six-month low. 

Gold, silver, and platinum

With silver and platinum showing signs of life, the lack of movement in gold speaks volumes about its continued attachment to the Chinese yuan, and about the renewed rise in bond yields to a certain extent as well.

While the dollar has shown some gold-supportive signs of topping out over the past week, not least against the euro, the yuan remains weak. In fact, today saw the onshore yuan decline for a third session after the People's Bank of China set the daily fixing at 6.8571, the weakest level since August 24. This could indicate that the PBoC, instead of having drawn a line in the sand, is only managing the movements in order to avoid a sharp decline. 

In addition, the latest run up in US bond yields, both notional and real, ahead of today’s Federal Open Market Committee meeting has also weighed on sentiment. The rise back above 3% in 10-year notes and the lack of movement in inflation expectations (breakeven) allowed the 10-year real yield to reach a seven-year high at 0.95% earlier this week.

With the market putting the risk of a third 2018 rate hike close to 100%, the focus will instead be on the forward guidance from the FOMC with regard to future rate hike expectations. 

Gold and yields
The continued yuan weakness and pre-FOMC nerves has sent gold back below $1,200/oz today. The chart shows a price development that for several months now has caused no headaches for funds holding a record short position in COMEX gold futures. For that to change, gold needs to break back above $1,212 and potentially even $1,239/oz before a recovery can be put in motion.

Until such time, the yellow metal remains stuck with better opportunities potentially presenting themselves in the other metals.
Source: Saxo Bank


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.