Gold price declines as stimulus prospects by central banks boost markets
London (July 11) Gold fell on Monday as strong US jobs data and the prospect of more monetary stimulus from some central banks boosted stock markets, while the dollar pushed higher against the euro.
Simmering concerns over the prospect of Britain leaving the European Union kept gold underpinned, however, and it is still within $20 of last week’s more than two-year high. The UK’s vote to leave the currency bloc has roiled markets in recent weeks.
Spot gold was down 0.6% at $1,358.50 an ounce at 9.30am GMT, having touched its highest since March 2014 last week at $1,374.91 an ounce. US gold futures for August delivery were down $1.30 an ounce at $1,359.70.
"The precious metal is losing some of its shine as investors are more focused on equity markets, given that the odds are high that central banks will continue to pursue their easing monetary policy for some time to come," Think Markets chief market analyst Naeem Aslam said.
"Dollar strength is also playing its part here." Shares rose in Europe and Asia on Monday following the US jobs data, while the yen fell by well over 1% against the dollar after Japan’s ruling coalition won a landslide victory in elections and ordered a new stimulus package. The dollar had already been boosted by the US jobs report on Friday, which saw investors price in the chance of a Federal Reserve interest rate increase before the end of the year.
A 24% chance of an increase by December is now being priced in, the CME FedWatch tool showed, though the overall view is still that interest rates will remain unchanged.
Gold is highly sensitive to US interest rates, increases in which lift the opportunity cost of holding nonyielding bullion, while boosting the dollar, in which it is priced.
Fading expectations for a US interest rate rise have pushed gold up 28% so far this year.
Data from the US Commodity Futures Trading Commission (CFTC) showed on Friday that hedge funds and money managers again raised their net long positions in COMEX gold and silver contracts to record highs in the week to July 5, after the June 23 vote by Britain to leave the EU.
"In our opinion, this gives rise to correction potential in both cases if speculative financial investors were to decide to take profits," Commerzbank said in a note. Silver was up 0.1% at $20.26 an ounce. Among other precious metals, platinum was down 0.7% at $1,093.80 an ounce, while palladium was unchanged at $615.23 an ounce.