Gold’s price retreat deepens as stocks, dollar point up amid trade-pact progress

March 4, 2019

New York (Mar 4)  Gold futures deepened their retreat below the closely watched $1,300 line with a fresh leg lower on Monday, driven there by gains in risk-on markets as trade-pact optimism grew.

Futures dropped below the $1,300 mark on Friday to settle at their lowest in a month and half, down over 2% for the week — the sharpest weekly fall since August. Broad risk-on sentiment, which boosted U.S. and global stocks, as well as strength in the U.S. dollar, worked to dull demand for the haven precious metal then and again on Monday.

In recent trading, April gold GCJ9, -0.86% fell $10.60, or 0.8%, at $1,288.70 an ounce. It settled Friday at $1,299.20 an ounce, the lowest most-active contract settlement since Jan. 25, according to FactSet data. For last week, bullion was down about 2.5%, which was the steepest weekly percentage decline for a most-active contract since the week ended Aug. 17.

Gold-backed exchange-traded fund SPDR Gold Shares GLD, -1.70%  was down 0.3% after dropping 2.3% for last week.

Read: Why gold fell in February, but is still on a long-term track to reach $2,000 an ounce

Trade news was front and center. Citing sources, a report in The Wall Street Journal said Washington and Beijing could reach a deal as early as this month. Reports said the pact would end most U.S. tariffs levied against China in exchange for the latter following up on its own promises to allow in more U.S. exports, among other measures. U.S. stock futures pointed higher in reaction.

The deal has yet to be finalized and hurdles remain on both sides, but a formal agreement could be reached at a summit — likely around March 27 — between President Donald Trump and Chinese President Xi Jinping, those sources said. China’s economy will also be in focus this week with the National People’s Congress due to kick off and officials expected to announce growth targets.

The dollar, as measured by the ICE U.S. Dollar DXY, +0.28% was firmer, making gold less appealing to investors using another currency. The index was last up nearly 0.3%.

The gold market’s sustained move below $1,300 changed the sentiment landscape, analysts stressed.

“The selling pressure of the past three sessions has completely changed the outlook on gold. From a decent-looking consolidation around the old breakout at $1,326, the strengthening downside has smashed through the 14-week uptrend,” said Richard Perry, analyst with Hantec Markets.

“The support at $1,276 is now crucial as this is the next key higher low. If this is also broken then the bears will gather significant momentum in a medium- to longer-term correction,” he said. “The long term pivot at $1,300/$1,310 is now a basis of resistance and, again, how the bulls respond to this as an area of overhead supply will be telling for the outlook.”

Rounding out trading, May silver SIK9, -0.53%  traded at $15.175 an ounce, down 0.5%. The contract shed around 4.1% for the week. May copper HGK9, -0.97%  fell 1% to $2.9015 a pound after a narrow loss for the week just concluded.

April platinum PLJ9, -2.63%  shed 1.8% to $848.50 an ounce, after a weekly rise of 2.1%, while June palladium PAM9, -0.42%  fell less than 0.1% after it gained 3% for last week.


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