Gold Slips to Two-week Low on Improved Risk Appetite; Equities Rally

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By: Sethuraman N R

Gold fell to a two-week low Wednesday, as investors opted for riskier assets such as equities on renewed optimism over the U.S. economy and as political uncertainty in France receded, softening demand for safe-haven assets.

Spot gold was mostly unchanged at $1,263.53 at 0741 GMT. Earlier in the session, prices hit a low of 1,260.90, their lowest since April 11.

U.S. gold futures were down 0.2 percent at $1,264.90 an ounce.

Asian stocks extended gains for a fifth straight day on Wednesday after Wall Street hit new peaks.

“Over the past two sessions, the momentum for gold to move ahead has actually faded away. We can see that risk appetite has increased after the easing situation in North Korea and French election results,” said Mark To, Head of research at Hong Kong’s Wing Fung Financial Group.

“We have to move back to the original gravity of trading range of $1,200-$1,250.”

U.S. President Donald Trump is proposing a slash in corporate income tax rate to offer multinational businesses a steep tax break on overseas profits brought into the United States, officials said late Tuesday.

“For gold investors this may not be good news as the overall situation for the Trump administration is to ensure that there is sufficient capital inflow to asset markets including equities or dollar to finance fiscal deficit,” said To.

“They have to balance it by keeping the original momentum by rising rates and use fiscal policies to attract more and more people to the U.S. stock markets, which will be negative for gold.”

The threat of a U.S. government shutdown this weekend appeared to recede on Tuesday after President Donald Trump backed away from a demand that Congress include funding for his planned border wall with Mexico in a spending bill.

Political concerns in France ebbed after business-friendly centrist Emmanuel Macron won the first round of the French vote on Sunday and opinion polls indicated less support for the eurosceptic Marine Le Pen.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.69 percent to 854.25 tonnes on Tuesday after 6 tonnes of inflows.

According to Reuter’s technical analyst Wang Tao, Spot gold is expected to fall to $1,249 per ounce, as it has broken a support at $1,265.

Spot silver dropped 0.2 percent to $17.51 an ounce, after hitting over one-month low of $17.49.

Platinum climbed 0.3 percent to $952.60 an ounce, while palladium fell 0.2 percent to $798.83.




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