Gold price pulls back after recent gains as U.S. equities rally
San Francisco (Mar 30) Gold retreated on Wednesday, giving back much of its recent gains as investors turned their attention to a climb in the U.S. stock market. But the metal remains underpinned near term as expectations for cautious Federal Reserve moves on interest-rate policy dent the dollar.
Gold had snapped a three-session losing streak to settle higher Tuesday after Fed Chairwoman Janet Yellen stressed that the central bank will be slow moving, quashing speculation that the Fed could raise interest rates as early as April and even putting a June hike in question.
In Wednesday trading, June gold GCM6, -0.68% slipped $9, or 0.7%, to $1,228.50 an ounce after tacking on 1.2%, or $15.50, Tuesday. Despite a rough trading patch in late March, gold prices are up some 16% so far in 2016. For the month, gold is down about 0.5%.
The SPDR Gold Trust GLD, -1.21% was down 1.3%, poised for a monthly loss of around 1.2%.
Yellen’s comments “are going to help gold in the long term, but any pullback in prices likely have more to do with profit-taking and consolidation than economic policy,” said Adam Koos, president of Libertas Wealth Management Group.
Yellen’s dovish tone hurt the U.S. dollar DXY, -0.30% as rising interest rates bolster the U.S. currency at the expense of metals that don’t bear interest, including gold and other dollar-priced commodities.
The market’s reaction to the latest Fedspeak extended to riskier assets, including U.S. equities. Read:U.S. stocks rally as oil, dovish Yellen lift markets
“The Fed has made it clear that ‘caution’ is the operative mood of the day,” said Dean Heskin, chief executive officer of Swiss America Trading Corp.
The chairwoman said it’s too early to determine whether the rise in core inflation will be sustained. She said financial conditions are worse now than they were in December when the Fed uncorked the first interest rate hike in nearly a decade.
As the Fed guessing game continues, attention remains fixed on Friday’s release of the U.S. March payrolls data; it’s expected to show a solid, if not stellar, clip of hiring.
Markets got a snapshot of the employment picture when ADP on Wednesday said the private sector added 200,000 jobs in March, a modest deceleration from the prior month’s revised 205,000.
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As for other metals trading, May silver SIK6, -0.05% declined by 1.3 cents, or 0.1%, to $15.225 an ounce. May copper HGK6, -1.04% fell 2.5 cent, or 1.1%, to $2.189 a pound, July platinum PLN6, +0.34% added $1.10, or 0.1%, to $968 an ounce, while June palladium PAM6, -0.90% edged down by $4.75, or 0.8%, to $568.45 an ounce.
Base metals are moving in part due to dollar moves but are increasingly seeing supply/demand factors come into play.
“Copper fell for a time to $4,850 per ton (about $2.20 a pound) nonetheless, thus hitting its lowest level in nearly three weeks,” the Commerzbank analysts point out in their note.
They cite a reduction in copper stocks in the warehouses of the London Metal Exchange. For the first time since October 2014, those stocks dipped below the 150,000 ton mark again Tuesday. Copper stocks have now been reduced by around 90,000 tons, or 38%, since the beginning of the year, which points to solid demand for copper, the analysts said.
“However, it is questionable whether this is all real demand or whether there have simply been shifts. After all, in China copper stocks in the [Shanghai Futures Exchange] warehouses have been increased by a good 200,000 tons since the start of the year and currently find themselves close to a record high,” they said.
Source: MarketWatch
