Gold price drops as investors pile into equities

Image by Javier Cabrio

Gold fell for the third time over the last four sessions on Tuesday as economies worldwide further eased lockdown restrictions, strengthening the short-term economic outlook and boosting investor confidence in riskier assets.

Spot gold declined 1.1% to a near two-week low of $1,708.28 an ounce by 3:30 pm EST. Gold futures were down 1.8% to $1,703.40 on the Comex in New York.

Meanwhile, US stocks surged to a 9-week high on heightened investor optimism about business restarts, with the S&P 500 back above 3,000 for the first time since March.

“There is a risk-on tone in the market, driving the reversal of (gold’s) safe-haven flows”

Daniel Ghali, commodity strategist, TD Securities

“There is a risk-on tone in the market, driving the reversal of (gold’s) safe-haven flows,” Daniel Ghali, commodity strategist at TD Securities, told Reuters.

“A breakdown below $1,700 could crack open the doors towards $1,680 (for gold),” said FXTM analyst Lukman Otunuga. “Nevertheless, the downside is likely to be cushioned by trade woes, disappointing economic data and growth fears.”

Ghali believes “investment demand will continue to strengthen as the US Federal Reserve’s stimulus will remain in place for quite a substantive amount of time.”

The price of gold, which normally serves as a safe store of value during times of political and financial uncertainty, recently rose to a new seven-year high before fears of a prolonged recession were eased.

(With files from Reuters)

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