Gold slides back to $1,600s as economies restart and stock markets rise

The precious metal fell for a third day ahead of the Fed and the ECB policy announcements this week

Gold prices fell for a third day, sinking below $1,7000 mark on Tuesday. Reuters

Gold fell for a third day as a drumbeat of moves toward reopening economies plus gains in stocks eroded appetite for havens, with prices sinking below $1,700 per ounce ahead of policy announcements from two of the world’s leading central banks.

The precious metal eased after US equities hit the highest in almost seven weeks as states including Florida took steps toward easing restrictions. Italy, one of the countries hit hardest, prepared to begin reopening, although the World Health Organisation warned the coronavirus pandemic is far from over.

While bullion is still near the highest in more than seven years amid the outbreak, investors are questioning if there’s scope for further gains given the restarts. At the same time, they are tracking the stimulus by governments and central banks to aid growth, with the Federal Reserve and the European Central Bank to make policy announcements on Wednesday and Thursday.

While bullion saw some pressure from strength in stocks, “the demand destruction due to Covid-19 cannot be overstated, volatility in financial markets remains elevated and precious metals, especially gold, remain a good hedge”, said Avtar Sandu, senior manager for commodities at broker Phillip Futures. Moreover, the rebound of activity may be pushed back, he said.

Spot gold fell as much as 1 per cent to $1,696.87 per ounce and traded at $1,696.82 at 8:26am UAE time. Prices – which rallied to $1,747.36 per ounce on April 14, the highest since 2012 –  lost a combined 1 per cent over Monday and Friday.

The drop in prices came after worldwide holdings in bullion-backed exchange-traded funds eased on Monday following 25 days’ of net inflows, according to data compiled by Bloomberg.

“The risk sentiment continues to improve as more and more economies make plans to gradually reopen businesses,” said Howie Lee, an economist at Oversea-Chinese Banking Corporation. “The Fed and ECB are expected to have little market-moving announcements this week. It will be premature to think the worst is over, though and for that reason I think gold prices may continue to see support.”

In other precious metals, silver and platinum declined, while palladium advanced.