Gold slumps 2% as recovery hopes bolster risk appetite
· Gold fell more than 2% on Wednesday as risk sentiment improved on hopes of a recovery from a coronavirus-driven economic slump, with investors largely overlooking civil unrest in the United States and its friction with China.
· Spot gold slid 1.9% to $1,693.83 per ounce, having earlier hit a near one-month low of $1,688.89. U.S. gold futures fell 2.2% to $1,696.40.
· “There is a strong risk-on sentiment right now... U.S. equity markets are breaking out,” said Phil Streible, chief market strategist at Blue Line Futures in Chicago.
· U.S. stocks opened higher as investors remained optimistic about an economic rebound, with world shares hitting three-month highs.
Sentiments were also bolstered by data showing U.S. private payrolls fell less than expected in May, suggesting layoffs were abating as businesses reopen, though the overall economy’s recovery will be slow.
· “Generally markets are getting comfortable with the fact that even though the data is bad, things are likely to improve and that’s taking the shine off gold,” said Michael Hewson, Chief Market Analyst at CMC Markets UK.
Despite the pullback, gold is expected to remain supported by a weaker dollar, widespread protests in the United States, souring U.S.-China relations and massive stimulus measures, Hewson added.
· Gold, considered a safe-haven investment, tends to gain on political and economic uncertainties.
The dollar index fell to a more than two-month low.
· U.S. protesters ignored curfews overnight as they vented their anger over the death of an unarmed black man at the hands of police, but there was a marked drop in the violence.
· Holdings of SPDR Gold Trust gold-backed exchange-traded fund rose to 1,129.28 tonnes on Tuesday, their highest since April 2013.
· Elsewhere, palladium eased 0.1% to $1,948.18 an ounce, while platinum dipped 1.1% to $829.94. And Silver fell 3% to $17.55.
Reference: CNBC
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