Precise Investors Editorial Team
The overnight drop in gold was the main focus for markets, after prices of the yellow metal dipped more than 5% on Tuesday despite no obvious catalyst
Global shares slid on Wednesday and gold retreated sharply from a strong rally, as stretched valuations came under scrutiny and investors booked profits.
Geopolitics loomed large. A planned summit between Russian President Vladimir Putin and US President Donald Trump was put on hold and ambiguity lingered over a potential meeting between Xi Jinping and U.S. President Trump.
The overnight drop in gold was the main focus for markets, after prices of the yellow metal dipped more than 5% on Tuesday despite no obvious catalyst. It last traded 0.6% lower at $4,098.89 an ounce.
The precious metal has had a blockbuster run this year, jumping more than 50% as broader geopolitical and economic uncertainty, as well as expectations of US interest rate cuts, spurred demand for the safe-haven asset.
Gold was massively stretched, massively overbought. There’s been a lot of Fomo (fear of missing out) going into that market, said Tony Sycamore, a market analyst at IG.
It’s one of those situations whereby when positions become stretched — and you would have to say that the Nasdaq is certainly in that boat as well, for some of these other frothy markets, we are seeing little flash crashes now. We are just seeing little tremors in markets, and potentially there’s something more significant to come, he added.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.24%, while Nasdaq futures dropped 0.2% and S&P 500 futures slipped 0.07% after a mixed cash session on Wall Street.
EUROSTOXX 50 futures dropped 0.5%, while FTSE futures slipped 0.15% and DAX futures shed 0.26%.
Nikkei dropped 0.9%, in line with the broader market, though that followed two days of strong gains on expectations of greater fiscal stimulus under the country’s new Prime Minister Sanae Takaichi.
We expect ‘Sanaenomics’ to be broadly positive for the equities market, said Louis Chua, a research analyst at Julius Baer.
He expects further upside for the Nikkei, supported by the “twin tailwinds of corporate reform and a pro-growth reflationary path with Takaichi’s election”.
In China, the CSI 300 blue-chip index dropped 0.2%. Hang Seng Index slid 0.42%.
In currencies, the yen was nursing losses after slipping nearly 0.8% in the previous session on the back of Takaichi’s win, which investors expect could muddy the outlook for the Bank of Japan’s (BOJ) rate-hike path.
The euro last bought $1.1604, while sterling slipped slightly to $1.3370.
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