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Gold lost ground Wednesday, sliding below the psychologically important $1,700-an-ounce level as an ongoing stock-market rally in response to easing COVID-19 lockdowns robbed the yellow metal of its haven appeal.
Gold for June delivery GC00, -0.91% on Comex dropped $12.60, or 0.7%, to $1,693 an ounce, while July silver SIN20, -1.33% was off 13 cents, or 0.7% at $17.465 an ounce.
A dip below $1,700 could turn into a further correction, said Carsten Fritsch, analyst at Commerzbank, in a note. U.S. equities rose sharply on Tuesday as investors returned from a three-day holiday weekend, boosted by optimism over the easing of lockdowns and by fiscal and monetary stimulus efforts by governments and central banks.
Global equities remained in rally mode on Wednesday, with stock-index futures pointing to another round of strong gains for U.S. equities.
A loss of gold’s haven appeal could prove “fatal” for the yellow metal amid weak demand from other sources, Fritsch said, noting data from the Swiss Federal Customs Administration on Tuesday that showed the country exported 131.8 tons of gold in April, the highest volume since last August.
However, a record 111.7 tons went to the U.S., likely to fulfill demand by exchange-traded funds, he said, while exports to Asia collapsed almost completely.
“For the second consecutive month no gold at all was shipped to China; a mere 1 kilogram went to Hong Kong and 500 kilograms to India. This confirms what the Indian gold import figures and the bilateral gold trading data between China and Hong Kong had already indicated: gold demand has ground to a halt in China and India, traditionally the most important countries in terms of gold demand,” he said.
