Gold extended losses on Tuesday morning, setting a fresh one-month low in thin trading conditions.
Spot gold was last at $1,641.65/1,642.15 per ounce, down $3.50 on Monday’s close. The metal hit its lowest since the first week of January at $1,639.30 per ounce earlier.
“Gold and the other precious metals came under severe pressure yesterday lunchtime, as did the commodities market as a whole. The yellow precious metal broke through the technically important 200-day moving average, sparking follow-up selling and further exacerbating the downside pressure,” Commerzbank said.
Trading has been slow and is likely to remain that way for the rest of the week, with most of Asia absent for Lunar New Year celebrations.
“The Chinese are still absent and will remain that way this week,” David Govett, head of precious metals at Marex, said. “It has been a quiet session overnight with prices remaining weak. One would normally have expected to see some physical buying at this level, but this has not transpired… there may be another push to test the downside in the coming day or two.”
Still, the yellow metal has picked up slightly from the lows on safe-haven buying on geopolitical concerns – North Korea has conducted a third test on a nuclear weapon, the largest to date.
Fears about currency wars are weighing on gold. Germany and France have opposing views on the strength of the single currency – French finance minister Pierre Moscovici yesterday warned that a strong euro could damage Europe’s growth prospects, prompting Bundesbank president Jens Weidmann to respond that the euro was not overvalued and that a weak euro would create inflation risks.
The single currency was last at 1.3402 versus the US dollar, up from an earlier low of 1.3361 but down from this year’s highs above 1.37 from the end of last month.
The G7 responded by reaffirming its commitment to exchange rates set by the market, warning that “disorderly movements in exchange rates have adverse implications for stability”. This has intensified the focus on this week’s G20 meeting, where currency and exchange-rate policy settings will be in focus.
This week has already seen a meeting of the eurogroup – there has been debate among eurozone officials in response to concerns raised by French President Hollande regarding the need for an exchange-rate policy set by EU leaders.
The data side is again light today, although later this week Germany, France and Italy will release their latest quarterly GDP figures.
In other precious metals, silver was down 22 cents on Monday’s close at $30.70/30.73 per ounce – it fell to its lowest since the end of January at $30.58 earlier this morning.
In the PGMS, platinum edged $2 lower to $1,688/1,698 per ounce and palladium slipped $4 to $751/757.
