• Gold hits its lowest in nearly two weeks on Monday after centrist candidate Emmanuel Macron won the first round of French presidential election, boosting stocks and sparking a sell-off in the safe-haven bullion.
Spot gold was down 0.7 percent at $1,275.46 per ounce by 0342 GMT, after falling to a low of $1,265.90 earlier in the session.
• "Gold prices have fallen sharply this morning due to the improvement in risk sentiment," said OCBC analyst Barnabas Gan.
• "Macron and Marine Le Pen have emerged as the two key winners of the French elections. It does remove some of the suspense and risk-off sentiment we saw late last week."
"With Macron showing good results, the safe-haven buying dried up pretty quickly and I think this is the reason behind gold selling off this morning," said ANZ analyst Daniel Hynes.
The outcome lessens the risk of an anti-establishment shock on the scale of Britain's vote to quit the European Union, with Macron widely tipped to win the final vote and keep France in the union.
• The euro scaled five-month highs against the dollar in early Asian trading on Monday on relief at the result, while U.S. stock index futures rose sharply on Sunday.
• Hedge funds and other money managers increased their net long positions in COMEX gold for the fifth straight week to 18 April , lifting it to a five-month high, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.
• Spot silver was down 0.3 percent at $17.82 an ounce, after earlier touching a one-month low of $17.65.
• While gold is expected to maintain is bullish uptrend, the market could see some short-term profit taking next week as some major risk events de-escalate, reducing investor demand for safe-haven assets, according to some analysts.
• The major event on everyone’s radar this week is the first round of French presidential election Sunday. According to analysts, gold demand in Europe has increased as euro-skeptic parties have gained traction in the polls. Currently there is a four-way race ahead of Sunday’s election: Francois Fillo, leader of Les Republicains; Marine Le Pen of the Front National; Emmanual Macron, an independent; and Jean-Luc Mélenchon; representing Unbowed France. Currently bookmakers, who have proved more reliable than polls, give Macron a 51% chance of being the next president of France.
However, economists note that the candidate to watch will be Le Pen, who has gained in popularity. Along with promoting anti-immigration and nationalistic policies, she also supports holding a referendum on France’s membership in the European Union. Her performance in the first round would indicate rising support for a Frexit.
• While the election is too close to call, Ole Hansen, head of commodity strategy at Saxo Bank, said that is it unlikely Le Pen’s anti-euro, nationalistic party will gain enough votes to become president. He said that the majority of French voters won’t put their economy at risk in support of her party.
“I just don’t see Le Pen or other extreme parties winning the election. There is too much at risk,” he said. “Whoever beats Le Pen, I think will end up becoming the next president.”
While Hansen doesn’t expect to see any surprises Sunday, if the unexpected does happen, it could be enough to push prices above $1,300 an ounce.
• Barry Potekin vice president of managed futures accounts at RMB Group, said that while France is just one risk event impacting the gold market, there is still enough uncertainty around the world to keep tensions “on the boil” and support gold prices.
“The odds are right now that the money is on further upside,” he said. “If gold prices do break through $1,300, our first target is $1,360.”
“If equities keep going higher, then gold will suffer, but I don’t think that is going to happen. I think at current values, there is just too much risk in equities and caution is needed,” he said.
With the uptrend still in place, Potekin said that he is buying out of the money six-month calls and if gold continues to rise, he would look to add more short-term call options to his portfolio.
Hansen said that he like the idea of buying short-term puts to play a potential short-term correction. He added that he is watching support band between $1,257 and $1,255.
• Currency analysts at Brown Brothers Harriman said that they continue to expect to see further gains in the U.S. dollar, despite a drop in the first three months of the year. Widening interest-rate differentials between the U.S. and other central banks continue to support U.S. dollar strength, they said in a recent report.
• After some weakness at the start of the month, markets are once again pricing in a more than 50% chance of a rate hike in June. Traditionally, the Federal Reserve has not hiked interest rates when market expectations are below this level.
However, CME 30-day Fed fund futures are showing some hesitancy for a third rate hike, pricing in only a 37% chance that interest rates will end the year in a range at least between 1.25% and 1.50%.
• Chris Beauchamp, market analyst at IG, said that he could see gold prices fall back to $1,253 an ounce and still maintain its bullish uptrend.
“It seems that we will continue to see gold weaken, with the pullback in a broader uptrend still playing out,” he said. “Bulls will need to wait until we see the price move back to $1,253 and the 200-day simple moving average (SMA), or even down to the rising trendline around $1245.
Reference: Reuters, Kitco
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