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Gold Declines As Equities Rally on Recovery, Vaccine Hopes

May 26, 2020 at 14:14 by Andrew Moran

Gold futures are sliding to start the holiday-shortened trading week as the broader market is rallying on economic recovery and vaccine development hopes. The yellow metal had been losing its shine this month amid the double-digit rebound in the leading stock indexes. Gold’s dip was capped by escalating US-China tensions regarding trade and Hong Kong.

June gold futures tumbled $14.00, or 0.81%, to $1,721.50 per ounce at 12:57 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. Gold has been paring its year-to-date gain to below 14%, driven by the 0.7% loss last week and the 0.1% dip in May.

Silver, the sister commodity to gold, is trading higher to kick off the first day back from the Memorial Day long weekend. July silver futures advanced $0.167, or 0.94%, to $17.86 per ounce. With its 17% surge this month, the white metal has erased almost all its losses in 2020.

The biggest factor for gold in the near-term is that there are no substantial catalysts outside of geopolitical tensions. US financial markets are posting huge gains on Tuesday over positive news on the vaccine front, as well as optimism over more jurisdictions reopening their economies. Since gold is still trading at its best level since 2013, investors are selling and taking the profit.

But the precious metal could receive underlying support from US-China strife. In addition to the war of words over trade, Washington has rebuked Beijing over its national security laws that undermine Hong Kong’s semi-autonomous government. Critics allege that the legislation could ban large-scale protests similar to what happened last year and allow Chinese authorities to jail opposition figures. The National People’s Congress says the law is necessary to secure the people of China, as well as Hong Kong.

US officials warn that China could be faced with sanctions – economic and otherwise – if it moves ahead with the policy.

Data failed to lift gold prices on Tuesday. The S&P/Case-Shiller Home Price rose 1.1% in March, up from 0.5% in February. The Federal Housing Finance Agency (FHFA) confirmed that its housing price index edged up 0.1%. New home sales jumped 0.6% last month, up from -13.7% in March, to an annualized rate of 623,000. This month, consumer confidence increased to 86.6.

A weakening US dollar further helped the precious metal. The US Dollar Index, which measures the greenback against a basket of currencies, plunged 0.8% to 99.06. A weaker buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

In other metal markets, July copper futures picked up $0.0415, or 1.74%, to $2.428 per pound. July platinum futures shed $5.70, or 0.64%, to $880.60 an ounce. July palladium futures slipped $4.80, or 0.24%, to $1,972.30 per ounce.

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