(Bloomberg) — “Gold advanced as fears of a spillover from debt woes of Asian real estate developer China Evergrande Group stoked demand for havens, outweighing concerns that the Federal Reserve’s reduction in stimulus could come soon.”
U.S. equities dropped over 2% due to investor angst worsening as China’s real-estate sector and the Fed tapering stoked fears. The dollar marched to the highest level in almost a month and the Treasury yields slipped causing a boost in demand for non-interest bearing bullion.
“Gold is actually acting as gold. It’s getting flight-to-safety buying due to concerns how bad we’re actually getting with news over the weekend out of China,” Bob Haberkorn, senior market strategist at RJO Futures said “If there’s a complete fallout, it’s going to reverberate over the markets.”
Evergrande will have interest payments on its two notes due Thursday. This will decide whether the real estate giant from China will continue to meet bondholder obligations. Investors will also be eager to see Xi Jinping’s government response; if any, to intervene on behalf of the world’s most indebted property developer to prevent destabilizing the world’s second-largest economy.