Gold fell on Monday, pulling back towards last week’s more than one-month low as easing tensions on the Korean peninsula boosted appetite for assets seen as higher risk, such as stocks, and lifted the dollar.
The metal slid 1% last week on the back of a stronger dollar and a rise in Treasury yields to above 3%, which weighed on interest in non-interest bearing assets. On Thursday, it hit its lowest since March 21 at $1 315.06 an ounce. That has left it on track to end April down 0.5%, erasing all the previous month’s gains. Spot gold was down 0.4% at $1 316.15 an ounce by 09:35 GMT, while US gold futures for June delivery were 0.5% lower at $1 316.90 an ounce.
“Easing geopolitical concerns and the strengthening dollar index are the factors which are creating the sell-off,” said Naeem Aslam, chief markets analyst at Think Markets. “We are looking at two important support levels – $1 307 followed by $1 300,” he said, adding that a “break of these levels would bring more selling pressure.”
At their summit on Friday, North Korean leader Kim Jong Un and South Korean President Moon Jae-in declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the “denuclearisation” of the Korean peninsula.
The dollar index rose 0.2% on Monday, holding just below its strongest since mid-January, while European shares rose after a positive session among Asian stocks overnight as tensions on the Korean peninsula eased. Hedge funds and money managers cut their net long position in COMEX gold contracts and switched to a net long position in silver contracts in the week to April 24, US Commodity Futures Trading Commission data showed on Friday.
“After nine consecutive weeks of a rare and even record net short silver position for money managers, the latest data shows that for the week ending Tuesday 24 the funds have returned to a slight net long,” ING said in a note. “Prices had briefly rallied above $17/oz but failed to hold as gold prices also fell.
The gold/silver ratio has since recovered back above 80x since briefly hitting lows of 78x.” Among other precious metals silver was down 0.6% at $16.40 an ounce, off an earlier three-week low of $16.37. Platinum was down 0.6% at $905 an ounce, and palladium was 0.4% lower at $969.72.