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Gold Prices Drift Lower but Data, Central Banks Remain Supportive

Published Mar 30, 2020 11:24AM ET Updated Mar 30, 2020 11:30AM ET
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By Geoffrey Smith 

Investing.com -- Gold prices were moderately lower on Monday as equities opened the week in positive tone, shrugging off President Donald Trump’s decision to keep the existing advice again non-essential business and movement in place until the end of April.

Trump had earlier hoped to lift the restrictions by Easter, which falls on April 12, hoping to sustain the economy ahead of the election in November. The Dallas Fed manufacturing index, which is heavily influenced by conditions in the oil and gas sector, fell to an unprecedented -70 in March, according to figures released on Monday.

However, with over 143,000 confirmed Covid-19 cases in the U.S., and with the number of new infections still rising rapidly, the President appears to have yielded to counsel from his scientific advisors.

By 11:25 AM ET (1525 GMT), gold futures for delivery on the Comex exchange were down 0.7% at $1,643.00 a troy ounce, while spot gold was down 0.8% at $1,618.80 – again opening up the arbitrage between physical and financial gold that was visible for most of last week.

Silver futures were down 2.2% at $14.22 an ounce, while platinum futures were down 2.5% at $722.95.

According to Commodity Futures Trading Commission data, net speculative long positions on gold fell for a fourth straight week last week to their lowest so far this year. Nicholas Frappell, general manager at ABC Bullion in Sydney, said the move appeared to represent the liquidation of long positions, given that open interest in the contract had fallen smartly in recent weeks.

In theory, that should make it easier for gold to rally from the current level, as the overhang of speculative longs diminishes.  However, markets remain choppy as the medical emergency continues to play itself out.

Other havens, meanwhile, are starting to enjoy the tailwind of central bank support that does not blow for gold to the same extent, even if it does improve the relative yield position for the yellow metal. Long-dated U.S. Treasury yields fell by over 12 basis points Monday on the prospect of Federal Reserve buying, while the European Central Bank said it bought 15.6 billion euros of government bonds on Thursday and Friday alone as it opened its 750 billion-euro ($825 billion) Pandemic Emergency Purchase Program.

The ECB’s purchases still weren’t enough to hide the euro zone’s differences over joint debt issuance at the weekend, however, as European Commissioner Ursula von der Leyen raised hackles in Italy by calling the so-called ‘coronabonds’ “a buzzword” and deferring to resistance in Germany and elsewhere.

The spread between Italian and German borrowing costs, a rough indicator of eurozone breakup risk that is usually positive for gold, rose back above 200 basis points as a result.

Gold Prices Drift Lower but Data, Central Banks Remain Supportive
 

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