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Gold Suffers Biggest Daily Drop in a Year on US-China Trade Truce

July 1, 2019 at 14:05 by Andrew Moran

Gold futures are recording their largest daily decline in about a year, sliding below the $1,400 market for the first time June 20. The yellow metal’s trade direction is being driven by the US and China agreeing to hit the pause button on escalating the trade war. Investors are fleeing the safe-haven asset and pouring into equities, lifting the leading indexes to at least a 1% gain to kick off the trading week.

August gold futures tumbled $16.80, or 1.19%, to $1,397.00 per ounce at 13:37 GMT on Monday on the Comex division of the New York Mercantile Exchange. This is the largest daily decline since June 2018. Gold prices posted a modest weekly gain last week, but it was their monthly performance that turned heads rallying about 8%. Year-to-date, gold is up 9%.

Silver, the sister commodity to gold, is also swimming in red ink to start the trading week. August silver futures fell $0.11, or 0.8%, to $15.19 an ounce. The white metal endured a 0.2% weekly decline last week, but prices surged 5% in June. So far this year, silver is slumping 2%.

Were the analysts correct after all?

At the start of the G20 summit, President Donald Trump was seen in a sideline meeting with President Xi Jinping. There was speculation at the time that the two global leaders were going to agree to a ceasefire. This is what happened with both sides ready to restart trade negotiations as Washington promised no new tariffs and relaxing restrictions on Huawei. It is unclear what, if anything, Beijing pledged.

This impacted the appeal for bullion and stimulated financial markets and the greenback.

On Monday, the US Dollar Index surged 0.33% to 96.45, a one-week high. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

But it is unlikely that the world’s two largest economies will iron out a new trade deal anytime soon. Considering the volatile nature of the White House, additional spats are possible that could possibly expand the trade spat for another few months.

And that might be what investors are betting on.

According to the US Commodity Futures Trading Commission (CFTC), money managers and hedge funds increased their long positions on Gold in the week ending June 25.

On the data front, the June Markit Manufacturing Purchasing Managers’ Index (PMI) clocked in at 50.6, up from 50.5 in May.

In other metal markets, August copper futures dipped $0.005, or 0.2%, to $2.70 per pound. September platinum futures tacked on $3.80, or 0.45%, to $844.90 an ounce. September palladium futures added $4.30, or 0.28%, to $1,541.90 pounce.

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