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Gold Retreats From 14-Month High As Equities Rebound on US-Mexico Deal

June 10, 2019 at 16:20 by Andrew Moran

Gold futures are retreating from their best levels in more than a year as global markets rebound. After the US and Mexico reached an agreement on tariffs and immigration, leading US stock indexes surged as much as 2% to kick off the trading week. Investors are also betting that the Federal Reserve will cut interest rates to stimulate the economy and boost equities.

August gold futures tumbled $13.60, or 1.03%, to $1,332.50 per ounce at 15:56 GMT on Monday. Last week, gold prices, which recently topped a 14-month high, recorded a gain of about 1%, increasing their year-to-date gains to roughly 4%. It has had a superb third quarter, rallying more than 3% in the April-to-June period.

Silver, the sister commodity to gold, is also plunging to start the trading week. July silver futures fell $0.32, or 2.14%, to $14.71 an ounce. The white metal did post a weekly jump of 2%, but it remains in the red by just under 6% on the year.

On Friday, the US government announced that it will not impose tariffs on Mexican imports after President Donald Trump warned of 5% levies on goods if the government failed to rein in illegal migration. Frightened of the economic implications, Mexico caved to Washington and announced that it would be sending troops to its southern border to prevent a flood of people sneaking across the border.

When markets returned from the weekend, the Dow Jones rallied more than 200 points, the S&P 500 climbed 1.04%, and the Nasdaq surged 1.98%.

But investors are still spooked by trade tensions, particularly after President Trump warned additional tariffs would be placed on Chinese imports if President Xi Jinping refuses to attend the G20 summit later this month. However, Beijing has hinted that it will begin to address its US trade surplus, which would be welcomed news for the Trump administration.

Later this month, the US central bank will hold a Federal Open Market Committee (FOMC) policy meeting. While the market is not anticipating a June rate cut, traders are expecting one in July, according to CME Group FedWatch tool data. This would please the White House after months of complaining about the Fed normalizing rates and not giving the administration the same type of leverage as the previous administration had to grow the economy.

The US Dollar Index rose 0.27% to 96.80 on Monday after reporting a weekly decline of 0.5% last week. A stronger greenback is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

In other metal markets, July copper futures tacked on $0.03, or 1.25%, to $2.66 per pound. July platinum futures shed $0.30, or 0.04%, to $805.80 an ounce. July palladium futures spiked $29.00, or 2.14%, to $1,385.00 per ounce.

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