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Gold Slides on Stronger US Dollar, Market Rebound

February 3, 2020 at 16:59 by Andrew Moran

Gold futures fell as much as 1% to kick off the trading week, driven by a stronger US dollar and a rebound in financial markets. Although the Wuhan coronavirus appears to be worsening in China and the rest of the world, investors are lauding Beijing for taking actions to limit the economic damage. Is the yellow metal still on track to test $1,600?

April gold futures tumbled $7.70, or 0.48%, to $1,580.60 per ounce at 15:42 GMT on Monday on the Comex division of the New York Mercantile Exchange. Gold prices, which have been retreating from their best levels in more than six years, enjoyed both a monthly and weekly gain last week.

Silver, the sister commodity to gold, is sliding to start the trading week. March silver futures fell $0.35, or 1.95%, to $17.67 per ounce. While the white metal did enjoy a modest monthly jump, silver did suffer a weekly loss.

The metals market is being mostly driven by a rally in US markets. The greenback soared 0.42% to 97.80, from an opening of 97.37. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase. The dollar has enjoyed an impressive start to 2020, advancing more than 1%.

Meanwhile, equities are taking back about half of Friday’s 600-point rout. The Dow Jones Industrial Average surged as much as 350 points on Monday, while the Nasdaq posted a triple-digit gain. Asian markets are experiencing quite the opposite: the Shanghai Composite shed 8%, the Nikkei lost 1%, and the Kospi dipped 0.01%.

But investors are pleased that China is taking swift action in supporting the world’s second-largest economy in the fallout of the Wuhan coronavirus. On Sunday, the People’s Bank of China (PBoC) announced it would be injecting $174 billion into the economy to cushion stocks, which is about $100 billion more than the same time a year ago. The central bank will be introducing 30 other stimulus measures to limit the damage from the coronavirus as the country returns from the prolonged Lunar New Year holiday.

The death toll reached 361 and the total number of people infected with the virus surged to 17,328

On the data front, US manufacturers expanded for the first time in six months as the Institute for Supply Management (ISM) survey jumped from 47.8% in January to 50.9% in February. Although the Caixin manufacturing purchasing managers’ index (PMI) dipped, the reading was still in expansion territory.

In other metal commodities, March copper futures were flat at $2.51 per pound. March platinum futures added $9.70, or 0.94%, to $970.90 per ounce. March palladium futures picked up $2.20, or 0.1%, to $2,226.89 an ounce.

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