Gold settled higher Tuesday, recovering earlier losses, as appetite for riskier assets waned and U.S. stock indexes weakened.
“Trade and tariff talks have distorted gold prices, as misunderstood gold” reacted to the Trump’s administration recent decision to shelve tariffs against Mexico, said George Gero, managing director at RBC Wealth Management.
Meanwhile, “Brexit problems escalate, and China-U.S. talks have question marks and traders await [Group of 20] talks later this month, he said. So “gold still looks range bound” in the $1,315 to $1,350 area “until we see more news.”
Gold for June delivery on Comex GCM19, +0.22% rose $1.90, or 0.1%, to settle at $1,331.20 an ounce after posting as loss of 1.3% on Monday. Futures prices still trade roughly 1.6% higher month to date.
“I have been looking for this rally to sell and the failure at $1,350 was a gift going into the summer months,” Peter Thomas, senior vice president at metals broker Zaner Metals, told MarketWatch.
“If the Fed stays dovish and China refuses to come to the table, $1,313 and then $1,291 for June and early July will happen,” he said, adding that “China is rapidly running out of money to purchase gold for its central bank.
Gold at $1,273 is “the intermediate floor for the summer if things don’t change next quarter,” said Thomas.
Earlier weakness for gold came as global equities staged gains after Chinese authorities said they would back special-purpose bond issuances by local governments as part of an effort to bolster economic growth. China’ government will step up efforts to accelerate financing of major projects through such bond issuance, which are used largely for infrastructure investment, the People’s Bank of China said in a statement, according to The Wall Street Journal (paywall).
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As gold futures settled Tuesday, however, U.S. stock indexes moved lower, prompting some investors to turn to haven gold.
Gold on Monday marked its first decline in nine sessions, undercut by a continued rally for equities and a rebound by the U.S. dollar and Treasury yields. A stronger dollar can be a headwind for commodities priced in the unit as it makes them more expensive to users of other currencies.
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Gold benefited from a sharp slide in U.S. Treasury yields last week as investors increasingly bet the Federal Reserve will move later this year to cut interest rates. Lower yields can be a positive for gold, reducing the opportunity cost of holding the metal.
Investors appeared to shrug off a lack of positive rhetoric around U.S.-China trade talks, which analysts said could reflect underlying optimism that a deal can be reached.
“Rising expectations of a formalized U.S.-China trade deal occurring this month could chip away at the gains enjoyed by safe-haven assets since late May, although the ensuing losses may be mitigated by concerns over the economic damage already inflicted by heightened U.S.-China trade tensions,” said Lukman Otunuga, research analyst at FXTM, in a Tuesday note.
In economic data Tuesday, the U.S. producer price index edged by up 0.1% in May, matching the MarketWatch forecast. “Nothing newsworthy for gold and inflation watchers so far,” said Gero.
In other metals trade, July silver SIN19, +0.72% edged up 10.1 cents, or 0.7%, to $14.74 an ounce.
July platinum PLN19, +1.13% rose $9.10, or 1.1%, to $814.30 an ounce, while September palladium PAU19, +0.13% added $2.40, or 0.2%, to $1,389.20 an ounce. July copper HGN19, +0.34% climbed by a penny, or 0.4%, to $2.672 a pound.
The SPDR Gold Shares exchange-traded fund GLD, -0.03% was trading nearly 0.1% lower.