Gold slides 1% as dollar gains, risk sentiment improves

Gold fell 1% on Monday as the dollar firmed and investors opted for riskier assets after China took steps to relieve pressure on its economy from the impact of the coronavirus epidemic.

Spot gold was down 1% at $1,573.76 per ounce after touching its highest since Jan. 8 earlier in the session. U.S. gold futures fell 0.6% to $1,578.10 per ounce.

“China have been taking very strong measures to make sure this thing (coronavirus) is contained, that’s kind of helping market sentiment,” said Bart Melek, head of commodity strategies at TD Securities.

“We have a bit of jump in the U.S. dollar and the biggest thing is that we’re seeing a rebound in stocks, getting people to perhaps take some profits and reposition modestly.”

China’s central bank unexpectedly lowered the interest rates and injected 1.2 trillion yuan ($171 billion) into money markets as it attempted to limit the damage from travel curbs and business shutdowns on the economy.

China’s move cheered some investors as U.S. stocks were set to open higher after the three main indexes suffered their worst week in at least four months.

The dollar gained 0.4% against its rivals, making gold expensive for holders of other currencies.

Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding nonyielding bullion.

Gold, often used as a safe store of value during times of political and financial uncertainty, registered its best week in a month in the week to Jan. 31, as economic growth worries due to the epidemic boosted appetite for safe havens.

“Gold’s rally seems to be in pause mode as markets will likely see central banks globally be proactive to thwart any slump coronavirus concerns will trigger,” Edward Moya, a senior market analyst at broker OANDA, said in a note.

Speculators cut their bullish positions in COMEX gold contracts in the week to Jan. 28, data showed on Friday.

Elsewhere, silver fell 2.1% to $17.66 per ounce. Palladium gained 1% to $2,301.53 and platinum rose 1.1% to $967.11.

CNBC

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya