Gold ends lower, in retreat from their highest levels since 2013

Gold futures turned lower on Wednesday, after the sharp rally in the past month to the highest levels since 2013, discouraged some potential buyers who are now waiting for a dip or some consolidation in prices in order to invest, analysts said.

“Gold is simply consolidating its recent gains…and also trading inversely to the U.S. equity market,” said Brien Lundin, editor of Gold Newsletter. When the stock market broke into the green early Wednesday, “gold dipped into the red, with both moves being a reaction to some calming of nerves regarding the trade spat with China.”

Gold for December delivery

GCZ19, -0.02%

 on Comex fell $2.70, or 0.2%, to settle at $1,549.10 an ounce after settling at $1,551.80 on Tuesday, the highest finish for a most-active contract since April 2013, according to FactSet Data.

Key long-term resistance for spot gold is at $1,558 an ounce, Chintan Karnani, chief market analyst at Insignia Consultants, told MarketWatch. However, from a technical perspective, prices may rise to $1,558 and $1,590 by Friday as long as they trade over the $1,520-$1,525 zone.

“Investment demand in gold has risen nearly every day so far in August,” Karnani said. “People are investing in gold on expectation that (a) Federal Reserve and other key central banks will cut interest rate aggressively for the rest of the year, (b) U.S.-China trade war will continue in the near future, [and] (c) central banks will continue to increase gold reserves.”

Still, “the pace of rise of gold will be the key. A lot of short term hot money has moved to gold from bonds and equities,” Karnani said. “If gold reduces the pace or rise or consolidates in the next two weeks, then there should be a correction in gold. Investments will move back to stocks and bonds.”

Gold had found some support earlier in the session as U.S. and European bond yields continued to slide, underlining fears of recession while the U.S.- China trade war remains unresolved and a no-deal Brexit looms for Europe.

The yield on the 10-year Treasury note

TMUBMUSD10Y, -0.86%

 fell a further 2.8 basis points to 1.4568% after ending at its lowest since 2016 on Tuesday and moving within striking distance of its all-time low near 1.36%. Falling yields reduce the opportunity of holding gold, which doesn’t offer a dividend.

September silver

SIU19, +1.00%

 added 16.5 cents, or 0.9%, to $18.318 an ounce. The more actively-traded December silver contract

SIZ19, +0.97%

added 15.8 cents, or 0.9%, to end at $18.456—the highest finish for a most-active contract since April 2017.

“Despite the dip in gold [Wednesday], silver is continuing its run higher,” said Lundin. “This is a sign that investors are also factoring in the longer-term issues of collapsing yields and general currency debasement.”

European government bond yields were also under pressure, with the 10-year Italian yield dipping below 1% for the first time on hopes a new governing coalition can be formed without fresh elections.

“The fact is that in the absence of a trade deal, the economic data will continue to deteriorate, global growth will slow, manufacturing data will continue to become worse and central banks will have no option but to support the markets with whatever they have,” said Naeem Aslam, chief market analyst at TF Global Markets, in a note.

With the Federal Reserve under pressure to keep cutting U.S. interest rates, gold is likely to not only breach resistance at $1,600 an ounce but could push toward $1,800, Aslam said.

In other metals trade, October platinum

PLV19, +4.22%

 rose 4.7% to $908.90 an ounce, with most-active contract prices settling above $900 for the first time since April. South African mining unions have continued negotiations with key platinum group miners, said Rhona O’Connell, head of market analysis, EMEA and Asia regions at INTL FCStone, in a recent note. “Thus far, the unions and the miners are relatively far apart,” she said.

September palladium

PAU19, -0.70%

 retreated 1.2% to $1,460.80 an ounce, while the now most-active December futures contract

PAZ19, -0.76%

 lost 1.3% to $1,462.50.

September copper

HGU19, +0.41%

 added 0.3% to $2.554 a pound. The most-active December contract

HGZ19, +0.67%

 settled at $2.5645, up 0.5%.

Among exchange-traded funds, SPDR Gold Shares

GLD, -0.10%

 fell by 0.1%.

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