Gold Pares Early Advance as Trade Hopes Boost Risk Assets
14 August 2019 - 6:29AM
Dow Jones News
By Amrith Ramkumar
Gold prices erased an early rally and fell Tuesday after the
U.S. Trade Representative said it would delay some tariffs on
Chinese imports and China's Xinhua News Agency reported that
officials from both sides plan to continue talks in two weeks.
Gold for December delivery, the most-active futures contract,
closed down 0.2% at $1,514.10 a troy ounce on the Comex division of
the New York Mercantile Exchange. The drop came after prices had
rallied more than 1% earlier in the U.S. trading session, only to
fall nearly 2% following the latest trade developments.
The volatility coincided with advances by stocks and bond yields
after the U.S. said it will delay some tariffs on Chinese imports
until Dec. 15 on items including cellphones and laptops. The duties
had been set to take effect Sept. 1. After they were announced
earlier this month, gold rallied to six-year highs with investors
worried the tariffs would limit consumer spending and limit
economic growth.
Tuesday's moves also came following a report from Xinhua that
Chinese Vice Premier Liu He recently spoke with U.S. officials and
the two sides plan to continue discussions in two weeks.
The swings were the latest example of trade-related market
volatility and were a negative for investors who had piled into
gold recently, though prices are still up about 17% for the
year.
Hedge funds and other speculative investors had pushed net bets
on rising prices to their highest level since July 2016 during the
week ended Aug. 6, the latest Commodity Futures Trading Commission
figures show. Data for the period ended Tuesday will be released on
Friday. Bullish wagers outnumbered bearish ones by 285,082
contracts during the most recent week, a 23% increase from the
prior week.
Despite Tuesday's drop, gold has also benefited from worries
about a slowing world economy that have pushed central banks around
the world to lower interest rates. Because the metal offers no
yield, it becomes more attractive to yield-seeking investors when
rates decline.
Expectations for further declines in global bond yields and
continuing political uncertainty are also fueling wagers that gold
can extend its sharpest move higher in years.
"There is much to suggest that the gold-price rally will
continue," Commerzbank analysts said in a note.
In another sign of investor anxiety about the world economy,
hedge funds and other speculators pushed net bearish bets on the
industrial metal copper to a multiyear high during the most recent
week, the CFTC figures show. Copper prices are tied to the
trajectory of global growth and economic activity in China -- which
accounts for nearly half of world consumption -- because the metal
is critical to construction and manufacturing.
Copper hit a two-year low last week with analysts expecting
trade uncertainty and a slowdown in factory activity around the
world to crimp demand.
Front-month copper for August delivery rebounded 1.7% to $2.62 a
pound Tuesday on hopes that a trade compromise will boost the
outlook for consumption.
Elsewhere in commodities Tuesday, U.S. crude oil added 4% to
$57.10 a barrel on the New York Mercantile Exchange, climbing
alongside other risk assets on hopes that thawing trade tensions
could lift the outlook for fuel demand. Fears about softening
consumption and steady supply resulting in a glut have swung oil
prices in recent months.
Brent crude, the global price gauge, rebounded 4.7% to $61.30 a
barrel on the Intercontinental Exchange, its largest one-day
advance of the year.
"Finally, suddenly, we see some positive news on the trade war
and it's a shot in the arm for oil markets," said Bjarne
Schieldrop, chief commodities analyst at SEB Markets.
-- David Hodari contributed to this article.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com
(END) Dow Jones Newswires
August 13, 2019 16:14 ET (20:14 GMT)
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