Metals Stocks: Gold prices end at lowest in over 3 weeks as investors snap up stocks

Gold prices ended Wednesday at their lowest in more than three weeks, unable to find traction as demand for equities picked up and data showing smaller-than-expected job losses in the U.S. private sector dulled haven-related demand for the precious metal.

Gold “collapsed like a house of cards on Wednesday…as investors overlooked civil unrest in the United States and heavily focused on hopes around central bank intervention and economic recovery,” said Lukman Otunuga, senior research analyst at FXTM.

“The precious metal is positioned to weaken further in the near term thanks to the improving market mood with $1,680 acting as the first level of interest,” he told MarketWatch. “A breakdown below this point may carve a path back towards levels not seen since mid-April around $1,665.”

Gold for August delivery
GCQ20,
-1.86%

on Comex lost $29.20, or 1.7%, to settle at $1,704.80 an ounce, with the most-active contract registering a third straight session decline. Prices posted the lowest finish since May 11, FactSet data show.

U.S. benchmark stock indexes, which have climbed back to early March levels on optimism over efforts to reopen the economy, moved higher in Wednesday dealings. Gold has failed to find much in the way of traditional haven support despite incidents of civil unrest across the country. Alongside peaceful demonstrations against police brutality, incidents of looting and arson have occurred.

Gains in the stock market followed data from Automatic Data Processing Inc., which showed the private sector shed 2.76 million jobs in May. That was well below forecasts from economists surveyed by Econoday who expected a loss of 8.66 million. In April, the private sector shed 19.56 million jobs.

In a Wednesday note, Carsten Fritsch, analyst at Commerzbank said gold is reliant on support from exchange-traded fund-related buying amid a dearth of demand from Asia as a result of the COVID-19 pandemic. The gold-backed SPDR Gold Trust ETF
GLD,
-1.89%

traded 1.7% lower Wednesday as gold futures settled.

“Though gold ETFs still registered inflows yesterday, these were much lower than in the days before. Gold is reliant on high ETF inflows to offset the acute demand weakness in Asia,” Fritsche said. “Whether the pent-up demand will be released later in the year is questionable, to say the least. At present nobody can predict what will happen to consumer behavior in India once the lockdown is lifted.”

The situation doesn’t look much better in China, Fritsch said, noting “negative net gold imports from Hong Kong and the fact that imports from Switzerland dwindled to zero in April.

“It is possible that the market will soon be flooded by even more surplus gold from China for which there is currently no domestic demand,” he said.

Meanwhile, July silver
SIN20,
-1.72%

declined by 30 cents, or nearly 1.7%, at $17.958 an ounce on Comex.

“The gold market is clearly exhibiting much more liquidating pressure than the silver market perhaps because silver could see quicker physical demand recovery, if a long pattern of risk on equity gains correctly signals better global economic activity,” analysts at Zaner Metals said in a daily note.

Among other metals, July copper
HGN20,
-0.14%

fell by 0.1% to $2.4875 a pound. July platinum
PLN20,
-1.34%

lost 0.9% to $860.50 an ounce and September palladium
PAU20,
-1.24%

ended at $1,958.20 an ounce, down 1.2%.

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