Increased appetite for riskier assets constrains gold
A breakdown in trade talks is the only scenario likely to breathe new life into gold prices at this time, one analyst says
Bengaluru — Gold fell on Monday as growing optimism about a US-China trade deal following a report of “constructive talks” at the weekend boosted sentiment for riskier assets.
Spot gold fell 0.6% to $1,458.50/oz at 11.14am GMT, while US gold futures were down 0.6% to $1,459.10/oz.
“Everything looks a lot more positive; U.S. markets are at record highs, trade talks are progressing a little bit slowly, the Fed has (cut) rates three times now — it looks bearish [for gold] compared to the kind of move we've seen over the summer,” Oanda senior market analyst Craig Erlam said.
“The trend for gold in the short-term is looking quite negative. From technicals, we have taken out all lows — $1,480 was the most important one, now $1,460.”
Chinese state media Xinhua reported that Washington and Beijing had a high-level phone call on Saturday and that the two sides discussed each other's core issues for the first phase of an initial trade agreement.
European shares edged closer to a record level as optimism about trade talks and a surprise move by China's central bank in cutting a key interest rate painted an upbeat picture about global growth.
“In all likelihood, a breakdown in trade talks remains the only scenario to breathe new life into gold prices at this time,” Jeffrey Halley, senior market analyst, Asia Pacific at Oanda, said in a note.
Market participants now await minutes of the Federal Reserve's last policy meeting, due on Wednesday, for clues about the future interest rate trajectory.
Gold is highly sensitive to interest rates, as lower interest reduces the opportunity cost of holding the nonyielding bullion. “The scenario is now getting more complicated for bullion, as a new fall below $1,445 would mean much more pressure from bears, creating space for further declines.
Only a solid recovery to $1,470 can halt bullion's current weakness,” Carlo Alberto De Casa, chief analyst at ActivTrades said in a note.
Meanwhile, investors also kept a close eye on developments in Hong Kong, with police on Monday trapping hundreds of protesters inside a major university and demonstrators rampaging through a tourist district, after almost two straight days of standoffs.
Gold is considered a safe store of value during times of economic or political uncertainty. Among other metals, silver was down about 1% at $16.78/oz, while platinum slipped 1.2% to $879.00/oz. Palladium rose 0.2% to $1,708.00/oz.