MW: Gold falls over $10 as stock market rally lures investors
Gold futures fell by more than $10 an ounce on Monday as investors turned their attention to the rally in U.S. equities.
Upbeat earnings as well as economic stimulus measures in China helped buoy confidence in the stock market.
Gold for June delivery on Comex GCM5, -0.68% fell $11.10, or 0.9%, to $1,192 an ounce on Comex. May silver SIK5, -2.09% fell 36.4 cents, or 2.2%, to $15.865 an ounce.
U.S. stocks rallied, luring investors away from gold, after China’s central bank over the weekend cut the amount of reserves commercial banks are required to hold, freeing up about $200 billion for lending.
“We have often warned that no one yet knows what happens to China’s gold demand when its economy hits trouble, but we surely look set to find out in 2015,” said Adrian Ash, head of research at BullionVault, in a note.
“Just like in the developed West’s own banking crisis starting 8 years ago, the government’s response will be crucial to deciding how much extra investment cash flees into bullion for fear of inflation,” he said.
The dollar gained ground on major rivals Monday, likely contributing more pressure to prices for dollar-denominated gold.
The euro EURUSD, -0.38% fell versus the greenback DXY, +0.23% as the market worried that negotiations between Greek officials and the country’s creditors have made little progress.
Still, gold has lost some of its appeal as the European Central Bank’s Mario Draghi reiterated that Greece isn’t going to be booted from the eurozone, said Adam Koos, president of Libertas Wealth Management Group.
This week, Koos said traders will be focused on the U.S. dollar.
Gold bulls will be hoping for a decline in the dollar following last week’s drop on subpar U.S. economic data, he said. “The USD has had such a huge swing to the north side this past nine months, it’s only natural to expect an exhale in rates and subsequent bump in gold.”
“There isn’t a ton of news expected this week, but the Fed’s policy meeting at the end of the month will be at the top of traders’ minds as an earlier rate hike would definitely be a game changer,” Koos said.
In other metals trade, July platinum PLN5, -1.70% fell $20.60, or 1.8%, to $1,146.80 an ounce, while June palladium PAM5, -1.35% dropped $13.20, or 1.7%, to $769.20 an ounce.
May copper HGK5, -1.51% lost 3.95 cents, or 1.4%, to $2.735 a pound.
