· Gold prices slipped to a more than three-week low on Tuesday as waning global economic slowdown concerns dented the precious metal’s safe-haven appeal and lifted equities to multi-month highs.
Spot gold was down 0.1 percent at $1,286.82 per ounce by 0524 GMT, having touched its lowest since March 7 at $1,284.76 earlier in the session.
U.S. gold futures fell about 0.3 percent to $1,291.
· “Concerns we saw emerge in the past few weeks around economic growth has certainly eased and that shift (in sentiment) in the past day or two resulted in little bit of selling in gold market,” ANZ analyst Daniel Hynes said.
“Most of the global growth is coming from China and the (Chinese) data over the weekend eased those concerns.”
· Strong manufacturing data from the United States and China triggered a massive sell-off in the U.S. bond market on Monday, which in-turn lifted Asian equities to seven-month highs.
Following upbeat factory activity data from China released on Sunday, a private business survey on Monday showed that the manufacturing sector unexpectedly returned to growth for the first time in four months in March.
This was followed by a better-than-expected U.S. manufacturing report which showed that activity rebounded a bit more than expected in March.
· Market participants are now looking ahead to the U.S. non-farm payroll data, due this Friday, for more details on the economy’s performance.
· Investors are also keeping a close watch on the Sino-U.S. trade negotiations, set to resume later this week in Washington with a Chinese delegation led by Vice Premier Liu He.
· Strong payroll data tends to boost the dollar, while any positive developments from the trade talks would further increase investors’ appetite for riskier assets, both negative for gold.
· The dollar index, which tracks the U.S. unit against key rivals, was trading close to a three-week high posted on Monday. A stronger dollar makes gold expensive for holders of other currencies.
· Indicating investor sentiment for bullion, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 1.5 percent on Monday, its biggest one-day percentage decline in a month.
· On the technical front, $1,275 to $1,280 an ounce level remains the key longer-term support for gold, according to an OANDA note.
Among other precious metals, spot palladium was down 0.4 percent at $1,414.11 an ounce, after rising the most since late February in the previous session.
· Could A Hard Brexit Trigger A Gold Rally? Keep Watching The Pound, Analysts Say
Hard Brexit or not, the British pound is the key to a potential gold rally in any scenario, according to analysts.
Outlandish scenarios aside, only an extreme Brexit resolution could trigger a significant move in gold prices, analysts told Kitco News on Monday, noting that majority of the scenarios have already been priced in by the markets.
The only thing left could be unexpected U-turn in the British pound, said Capital Economics senior commodities economist Ross Strachan.
“The most likely way there will be an impact at all on the gold market is through a major shift in the exchange rate, which could cause U.K. demand for gold to significantly shift because of the massive change in the sterling gold price,” Strachan said. “With the way things are going, things could take a significant turn for the worst and the pound could markedly weaken in extremely uncertain times.”
That said, Strachan reminded gold investors that Britain is a small market compared to major Asian powerhouses or the U.S.
There are still too many unknowns with Brexit to try to predict what will happen, said Strachan, noting that aside from the extreme forex reaction, Brexit is unlikely to have a significant impact on gold.
On the other hand, a significant rally in the pound could also work in favor of gold, highlighted RJO Futures senior market strategist Phillip Streible.
“You need a serious rally in the British pound [to trigger a gold rally]. If the pound goes up, then the U.S. dollar should go down and then gold futures should rally on dollar weakness,” Streible said. “You have to watch the pound. The pound’s volatility has increased quite a bit. The situation is becoming quite delicate over there.”
It could be “sell the rumor, buy the fact” situation with the British pound, noted Streible, explaining that the currency has already been selling off so much due to Brexit worries. “Once the deal is done, it will give the opportunity for the pound to rally and the dollar to sell-off and gold will get a boost,” he said.
Brexit’s impact on the British pound is what matters to gold, echoed RBC Wealth Management managing director George Gero.
Gold has taken a breather recently, capped by strong U.S. dollar and growing risk appetite, explained Gero. But, despite a “rocky road” for the short-term, the managing director sees a bright future for gold.
“God has been so focused on short-term headlines that it is no longer the same gold we are used to seeing,” Gero said. “For now we will stay in this $1,275-$1,325 range. But, I’m looking at $1,315 [and higher] for the year-end.”
· Silver slipped 0.3 percent to $15.06 an ounce, while platinum gained 0.2 percent to $849.47 an ounce.
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