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Gold Prices Slide as Risk Outlook Improves; Copper Hits 8-Month High

By Geoffrey Smith

Investing.com -- Gold prices fell on Monday as a broad risk-on move in global markets undermined haven assets in general.

With tension between the U.S. and Iran ebbing, and with the signing of a trade truce between the U.S. and China reportedly due on Wednesday, the appetite for safe assets waned markedly, leaving gold futures for delivery on the Comex exchange down 0.5% at $1,553.15 a troy ounce by 11:40 AM ET (1640 GMT).

Spot gold was down by a similar amount, losing 0.6% to $1,552.22.

Despite that, gold is still up 2% from the start of the year already, in another year that is likely to be dominated by historically low interest rates on government bonds, especially in Japan and Europe. The prospect of lower interest rates in the U.K. brought 10-year Gilt yields back down to 0.75% in London earlier, only one basis point above their low for the year.

That followed news that the U.K. economy shrunk in November as the country prepared for its general election in December. While some of the uncertainties that drove that contraction have since lifted, an increasing number of Bank of England officials have publicly hinted that they feel a rate cut may be needed at the end of the month. Gertjan Vlieghe, seen as a pivotal swing voter on the BoE’s Monetary Policy Council, became the latest to do so in an interview with the Financial Times at the weekend, in which he laid out the grounds for easing sooner rather than later.

Advances in gold, however, look difficult as the risk outlook improves, leaving an overhang of speculative long positions. The Commodity Futures Trading Commission said that net long commitments of traders hit an all-time high of more than 322,000 contracts last week.

Elsewhere in precious metals, silver futures also fell 0.5% to $18.02 an ounce, while platinum futures fell 0.9% to $977.95.

By contrast, copper, often seen as a proxy for global industrial activity, rose 1.6% to $2.86 a pound, its highest since May last year, as more traders placed bets on growth accelerating once the U.S.-China deal is signed. In a stark contrast with gold, net commitments from traders in copper have been virtually flat for the last couple of weeks.

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