Metals Stocks: Gold prices pull back as dollar perks up

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Gold futures on Monday traded slightly lower as the dollar edged higher and as a run-up for the precious metal appeared to cool, amid signs of growing optimism around treatments for coronavirus and an easing of global lockdowns intended to slow the spread of the illness.

Moves for bullion appear somewhat muted as investors brace for expected weak data from quarterly results from corporations. About 20% of the S&P 500 will report earnings this week.

“The dollar is continuing to apply downside pressure to the yellow metal and may continue to do so if risk appetite wanes in the face of weak corporate results,” wrote Craig Erlam, senior market analyst at Oanda, in a daily research note.

Gold for June delivery GC00, +0.04% on Comex fell $4.90, or 0.3%, to $1,693.70 an ounce, after the metal declined 3.1% over last week’s trade.

May silver SIK20, +0.55%, meanwhile, was off a penny, or less than 0.1% on Monday, at $15.29 an ounce, after putting in a weekly loss of 4.7% on Friday.

Gold retreated sharply to end last week’s trade amid reports of therapeutics for the novel strain of coronavirus that was first identified in Wuhan, China. The deadly coronavirus that has killed more than 165,000 people and doesn’t have any proven treatment. However, investors have pinned hopes on Gilead Sciences’s GILD, +9.73% experimental drug remdesivir, which has shown of success but isn’t fully vetted. On Monday, Novartis said it was conducting late-stage trials of hydroxychloroquine in hospitalized patients with COVID-19 disease.

Meanwhile, a number of European countries have started to slowly roll back restrictions on stay-at-home rules, including Germany on Monday, which has given some hope that lockdown procedures adopted globally to stem the contagion could end soon.

Against that backdrop and gathering momentum by the U.S. dollar, which precious metals are priced in, gold was facing a pullback. A stronger buck can make dollar-pegged commodities less appealing to buyers using other monetary units. The U.S. dollar against a half-dozen currencies was up 0.2% early Monday, as gauged by the ICE U.S. Dollar Index DXY, +0.17%.

The uncertainty around opening up nearly frozen economies and the likelihood that the market is facing a global recession could also provide support for the yellow metal in the longer term, commodity experts said.

“The longer-term outlook for the yellow metal remains bright though given the current environment but near-term softness may continue for now,” Erlam wrote.

Expected weakness in corporate quarterly results, as companies report the impact of the pandemic and offer their business outlooks, may provide some near-term support for gold, further limiting its downside, traders said.