Commodity Market: Gold extends losses on Wednesday as recovery optimism, stimulus prospects bolster global equities

Having snapped a three-day streak of gains on Tuesday, Gold extended losses in Asian and early European trade on Wednesday as investor optimism over economic recovery and prospects of more stimulus measures gave global equities a boost and dampened demand for the precious metal.

“There are a lot of investors who bought gold as a hedge for stocks, but stocks are going up and they don’t see value in that now,” Stephen Innes, chief market strategist at AxiCorp, said.

Shares in Asia and Europe rose as optimism over further stimulus and easing of COVID-19-related restrictive measures outweighed concerns over geopolitical tensions and continuing civil unrest in the United States.

Australia’s ASX rose 1.76% on Wednesday, Hang Seng went up 1.27%, Nikkei 225 surged 1.29%, while Shanghai SE Composite Index added 0.07%.

In Europe, FTSE 100 was gaining 1.18% in early trade on Wednesday, France’s CAC 40 – 1.73%, while Germany’s DAX – 1.89%.

The European Central Bank is expected to bolster its Pandemic Emergency Purchase Programme by about EUR 500 billion at its policy meeting on Thursday, while there are opinions that the Federal Reserve may also enhance its easing, since a few key officials have been discussing yield curve control as an option.

As of 9:35 GMT on Wednesday Spot Gold was retreating 0.57% to trade at $1,718.10 per troy ounce, after earlier touching an intraday low of $1,713.14, or a price level not seen since May 29th ($1,712.62). Meanwhile, Gold futures for delivery in August were losing 0.60% on the day to trade at $1,723.60 per troy ounce, while Silver futures for delivery in July were down 0.37% to trade at $18.192 per troy ounce.

Spot Gold has surged more than 18% since its near four-month low of $1,451.43 registered in mid-March.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was retreating 0.31% on Wednesday to 97.38, after touching an intraday low at 97.29, or a level not seen since March 12th (96.08).

In terms of macroeconomic calendar, today Gold traders will be paying attention to the monthly reports on US non-farm private sector employment at 12:15 GMT and US services sector activity at 14:00 GMT for further clues on economic recovery.

Meanwhile, near-term interest rate expectations were little changed. According to CME’s FedWatch Tool, as of June 3rd, investors saw a 96.4% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on June 9th-10th, compared with a 97.1% probability a day ago.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,731.65
R1 – $1,741.60
R2 – $1,755.26
R3 – $1,765.21
R4 – $1,775.16

S1 – $1,718.00
S2 – $1,708.05
S3 – $1,694.39
S4 – $1,680.74

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