Gold prices settle beneath 50-day moving average
Gold futures dropped by nearly 3% on Monday, amid an apparent flight to dollars and rising global risks, including renewed COVID-19 lockdown measures in Europe, partly to blame as bullion prices slumped to their lowest finish in two months.
A selloff across global equity markets, tied partly to worries over the rise in COVID-19 cases and the potential for the renewal of restrictions on activity, as well as uncertainty over a fresh round of government relief, added to the negative tone, analysts said.
Gold is “once again not providing shelter in these hazardous times,” said Craig Erlam, senior market analyst at Oanda, in a market update. “The dollar is instead making strides higher which is further pressuring commodity markets and taking gold with it.”
Against that backdrop, the dollar was up 0.8% at 93.641, as measured by the ICE U.S. Dollar DXY, -0.12%, a gauge of the buck against a half-dozen currencies. A stronger dollar can make gold more expensive to overseas buyers using other monetary units.
The bullion’s price settlement on Comex pushed gold beneath its short-term, 50-day moving average at $1,941.78 an ounce — a move that’s seen as contributing to a view that gold’s bullish short-term trend line was in jeopardy. Market technicians view moving averages as dividing lines between bullish and bearish momentum in an asset.
December gold GCZ20, 0.50% GC00, 0.49% lost $51.50, or 2.6%, to settle at $1,910.60 an ounce after trading as low as $1,885.40. The settlement was the lowest for a most-active contract since July 24, according to FactSet data.
December silver SIZ20, 1.73% SI00, 1.73% dropped $2.74, or 10.1%, at $24.387 an ounce, after last week logging a 1% weekly gain. Prices based on the most active contracts saw their lowest settlement since July 31.
Financial markets also declined amid “the anticipated political turmoil surrounding [Supreme Court Justice] Ruth Bader Ginsburg’s passing over the weekend,” said Brien Lundin, editor of Gold Newsletter. European equities tumbled Monday, while U.S. benchmark stock indexes moved sharply lower on Wall Street.
“Geopolitical flashpoints like these are no reason to buy gold when they elevate its price, and similarly are no reason to sell gold when they force it lower,” Lundin told MarketWatch. “That’s because they usually pass quickly with no long-term effects on the market.”
‘This stands to be a buying opportunity for gold given the very powerful long-term trends of extraordinary monetary accommodation.’
— Brien Lundin, Gold Newsletter
“However, when they drive gold lower they can be a buying opportunity,” he said. “Granting that the controversy over naming a successor to Ginsburg will likely add uncertainty to the political situation for weeks to come, there should be little doubt that the Fed will come in with whatever monetary adrenaline is necessary to support the markets.”
“This stands to be a buying opportunity for gold given the very powerful long-term trends of extraordinary monetary accommodation,” Lundin said.
Other metals saw prices drop, with December copper HGZ20, 0.78% down 2.7% at $3.032 a pound. October platinum PLV20, 1.63% fell nearly 6.7% to $876.10 an ounce and December palladium PAZ20, 1.11% lost 4.2% to $2,281.70 an ounce.
Looking ahead, Federal Reserve Chairman Jerome Powell will testify to the House Financial Services Committee on the CARES Act on Tuesday and the House Select Subcommittee on the coronavirus crisis on Wednesday.