Gold futures weaken; silver drops more than 2%
Gold futures settle lower on Monday, but silver took a bigger hit amid concerns over a slowdown in China’s economic growth.
Upbeat earnings as well as economic stimulus measures in China helped buoy confidence in the stock market, luring investors away from gold.
Gold for June delivery on Comex GCM5, -0.66% fell $9.40, or 0.8%, to settle at $1,193.70 an ounce on Comex. That was its biggest one-day point loss since April 9.
But silver was pressured by concerns over a slowdown in China’s economic growth. Silver is widely used as an industrial material and that makes it somewhat sensitive to changes in economic conditions in countries such as China, said Fawad Razaqzada, technical analyst at FOREX.com.
May silver SIK5, -1.81% sank 34 cents, or 2.1%, to settle at $15.889 an ounce. That was the lowest settlement since mid-March.
Meanwhile, U.S. stocks rallied, after China’s central bank over the weekend cut the amount of reserves commercial banks are required to hold, freeing up about $200 billion for lending.
China’s additional stimulus also serves as confirmation that the Chinese will continue to gradually devalue their currency, which is near-term bullish for gold prices in China, said Tyler Richey, analyst for the 7:00’s Report.
The dollar gained ground on major rivals Monday, likely contributing more pressure to prices for dollar-denominated gold.
Still, gold has lost some of its appeal as the European Central Bank’s Mario Draghi reiterated that Greece isn’t going to be booted from the eurozone, said Adam Koos, president of Libertas Wealth Management Group.
This week, Koos said traders will be focused on the U.S. dollar.
Gold bulls will be hoping for a decline in the dollar following last week’s drop on subpar U.S. economic data, he said. “The USD has had such a huge swing to the north side this past nine months, it’s only natural to expect an exhale in rates and subsequent bump in gold.”
“There isn’t a ton of news expected this week, but the Fed’s policy meeting at the end of the month will be at the top of traders’ minds as an earlier rate hike would definitely be a game changer,” Koos said.
May copper HGK5, -1.75% lost 4.15 cents, or 1.5%, to $2.733 a pound.