Metals: Gold Extends Losses
May 16 2018 - 01:02PM
Dow Jones News
By Benjamin Parkin and Georgi Kantchev
Gold prices drifted downward Wednesday, extending losses after
falling to the lowest point in 2018 this week.
The combination of a stronger U.S. dollar, higher Treasury
yields and concern about rising interest rates prompted a selloff
in the bullion market Tuesday, with prices seeing the largest
single-day drop since 2016.
Some of those pressures eased Wednesday, with the dollar
flattening, but gold prices continued to inch lower. Observers said
chart patterns suggested to traders that the market hadn't bottomed
yet.
"It doesn't look very good," said Edward Meir at INTL FCStone
Inc. "The market is really just buckling because of the strength in
the dollar, the strength in the interest-rate picture."
Gold futures for June delivery fell 0.2% to $1,287.50 a troy
ounce, carving a new low for the year. Some analysts suggested
traders were searching for a price range closer to the $1,280
mark.
Lower prices could spark some physical gold demand from
investors and others for coins and jewelry, Mr. Meir said, which
could help to limit losses going forward.
The WSJ Dollar Index, which measures the dollar against a basket
of currencies, was slightly higher Wednesday morning at 86.97. The
yield on 10-year U.S. Treasury notes drifted either side of
Tuesday's high.
Market observers also pointed to an uptick in geopolitical
tension as a potential tailwind for gold. North Korea this week
suspended a meeting with South Korea and suggested that it could do
the same for coming talks with the U.S., objecting to military
exercises between the two countries and pressure from Washington to
push rapid disarmament.
Commerzbank AG said that could stoke demand for gold as a haven
asset, which investors typically buy at times of heightened
instability.
"The geopolitical tensions in the Middle East (violent protests
in Gaza, uncertainty over the Iranian nuclear agreement) point to
solid demand for gold as a safe haven, as does the Korea conflict
that is flaring up again," the bank said.
But immediate price reaction Wednesday was muted, puzzling some
investors. Gold overnight rose to a peak of a little over $1,296
before resuming its recent descent.
Copper prices were mixed before turning slightly higher.
July-dated contracts rose 0.1% to $3.0615 a pound. Traders were
content to keep copper around the low end of a recent price range,
analysts said. Concerns the Chinese economy could slow in the year
ahead has capped investor demand for the industrial metal.
Write to Benjamin Parkin at Benjamin.Parkin@wsj.com and Georgi
Kantchev at georgi.kantchev@wsj.com
(END) Dow Jones Newswires
May 16, 2018 12:47 ET (16:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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