Gold prices continue falling as odds improve of a Trump-Kim meeting

London (May 28)  Gold prices fell on Monday for a second session after US President Donald Trump revived the hope that he would meet North Korean leader Kim Jong-un in June, lowering political tension and demand for gold as a safe-haven investment.

Trump last week pulled out of the June 12 summit, pushing gold above $1,300/oz, but then reversed his decision and said on Sunday that a US team had arrived in North Korea to prepare.

"It looks like there is some chance of a meeting between the US and North Korean leaders that would lower geopolitical risks and lessen the appeal of gold," said National Australia Bank economist John Sharma. Gold is traditionally used as a safe place to store assets during times of uncertainty. Spot gold slipped by 0.3% to $1,297.85 an ounce by 10.19am GMT, while US gold futures for June delivery were down 0.5% at $1,297.30.

Trading volumes were low with New York and London markets closed for public holidays.

Demand for gold as a safe-haven investment was also dented as Italy’s anti-establishment 5-Star and League parties abandoned plans to form a government hostile to the European single currency, triggering a rally in the euro. Gold had been trading between about $1,310 and $1,360 since hitting a one-and-a-half-year high in January, but it was pushed lower earlier in May as the dollar strengthened to 2018 highs, making bullion more expensive for buyers using other currencies.

Speculative bets on higher prices have fallen sharply, with funds’ net long position in Comex gold falling to its lowest level in 10 months.

Prices are now trapped between gold’s 200-day moving average at $1,307 and Fibonacci support at $1,286, said Saxo Bank analyst Ole Hansen. "The potential for fireworks is biggest on the upside given the sharp reduction we have seen in speculative longs," he said.

"If we do break higher, the funds will have to chase the market to rebuild their long positions."

In other precious metals, spot silver was down 0.2% at $16.44 an ounce.

Speculative investors have become less pessimistic about prices, with data on Friday showing their net short position in Comex sliver at its lowest since February 2014.

Platinum was up 0.4% at $900.50/oz while palladium firmed 0.1% to $980.30.

Reuters