Gold spirals lower on vaccine-led economic recovery bets

London (Nov 30)  Gold prices extended their slide to five month lows on Monday as prospects of a vaccine-led boost to the economy cast a shadow over safe-haven assets and set bullion on course for its worst month in four years.

Spot gold was 0.9% lower at $1,771.96 per ounce by 1208 GMT, shedding 5.6% so far this month. The metal also hit its lowest level since July 2 at $1,764.29 earlier in the session.

U.S. gold futures dropped 0.8% to $1,774.40 per ounce.

“The news of vaccines has led to a lot of optimism in the market and we are seeing some outflows in safe-haven assets like the dollar, Treasuries and the same is being reflected in gold prices,” said OANDA analyst Craig Erlam.

Gold prices fell despite the dollar hitting its lowest level in two and a half years.

Bullion has declined more than $300 an ounce from a record high of $2,072.50 an ounce hit in August.

“The short-term trend for bullion has been compromised by the price falling through the support level at $1,850,” ActivTrades’ chief analyst Carlo Alberto De Casa said in a note.

“Investors have moved to other assets, seeking faster gains, although they haven’t forgotten that central banks will be forced to print money for many years to help the economy to recover from the Covid-19 crisis.”

Optimism around vaccine-induced economic recovery has put world shares on track for their best month on record.

Data showed China’s factory activity expanded at the fastest pace in more than three years in November, also aiding the risk sentiment.

Investors are now looking to congressional testimony by U.S. Federal Reserve Chairman Jerome Powell this week.

Silver fell 2.4% to $22.16 an ounce, after dropping as much as 3.6% earlier in the session. The metal was on track for a 6.2% fall on a monthly basis.

Platinum fell 0.4% to $960.09, while palladium slipped 1.1% to $2,397.31.

Reuters