Gold Falls From Record as U.S., Europe Stocks Rise, Dollar Gains
(Bloomberg) -- Gold fell from a record as U.S. and European equities rose on positive economic data and the dollar climbed.
Factories across the euro area posted a stronger return to growth in July than initially reported, marking the region’s first manufacturing expansion in more than a year. Factory managers in Asia had a modest pickup in activity in July on China’s demand.
For gold, “we have definitely seen a loss of momentum over the past several sessions where only modest, even marginal new highs are being made, which has likely driven shorter-term players to take some profit and trade it, rather than simply holding long positions,” said Tai Wong, head of metals derivatives trading at BMO Capital Markets. “It suggests a deeper albeit still modest correction is possible.”
Spot gold fell 0.4% to $1,968.16 an ounce at 10:23 a.m. in New York after reaching an all-time high of $1,988.40. Silver declined 0.9% to $24.19 an ounce after surging 34% in July.
While the rally appeared to pause, analysts who say gold is overvalued aren’t expecting a substantial decline. A correction probably will be measured, thanks to the weak dollar and chronic turmoil in the global economy, BNP Paribas SA said.
In July, gold surged 11%, the most since 2012, as investors weighed a weaker dollar and record low U.S. real yields. Strategists are now considering alternatives to government debt, such as cash, credit, dividend shares and gold. RBC Capital Markets said that gold looks like a “freight train” due to haven demand.
The coronavirus pandemic prompted unprecedented amounts of stimulus to shore up economies, including lower rates, which are a boon for non-interest-yielding gold. Simmering geopolitical tensions are boosting demand. U.S. Secretary of State Michael Pompeo said the Trump administration will announce measures shortly against “a broad array” of Chinese-owned software deemed to pose national-security risks.
The economic data on Monday drove copper and industrial metals higher, erasing earlier losses.
Copper for three-month delivery on the London Metal Exchange rose 0.9% to $6,470.50 a metric ton.
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