Gold Plunges on Firmer Equities

A stronger dollar, boosted by fading Brexit repercussions and upbeat US economic reports, are dragging commodities down, including gold. 

Precious metals including gold tumbled on Monday due to firmer, positive equities causing a weak trend overseas. The easing Brexit fallout impact on the US and optimistic US economic data are specifically what contributed to solid equities, thus a stronger dollar.

Spot gold plunged 0.4% at $1,316.16 a troy ounce. Bullion declined 0.7% last Friday, falling for a second week now. US gold toppled 0.5% to trade at $1,316.20 an ounce.

“We could see some falling of gold prices with markets thinking things are not as bad as expected post-Brexit and the good performance of key US economic indicators,” stated Jiang Shu, a chief analyst at Shandong Gold Group.

The decline was largely impelled by weak trends in global markets as upbeat equity markets and gains in the greenback dampened demand ahead of central bank meetings in the US and Japan set this week.

Based on data last Friday, hedge funds and money managers continue to flock on bullish silver bets in the week to July.

Gold Tumbles amid Revived Rate Hike Hopes

The precious metal fell to a three-week trough on Wednesday, extending overnight losses in North American trade as possibilities for the Federal Reserve to raise interest rates in latter 2016 were rekindled.  Contributing to the gold slump are also the positive US economic outlook and US stock futures gains brought by upbeat earnings results.

These renewed expectations and optimistic economic picture boosted the greenback and thus, dragged down gold prices.

Bill O’Neill, a broker at LOGIC Advisors, said that: “Gold had everything going for it. Now we’re in a period where things are a lot calmer… The perfect playing field that existed for gold is not in play for the short term.”

On the Comex division of the New York Mercantile Exchange (NYMEX), gold sank 1.2% to a low of $1,316.00 a troy ounce, a level last touched in June 30 during the period Britain voted to leave the European Union. It last traded at $1,318.70 by 12:38 GMT, down 1.02%.

Nonetheless, the yellow metal remained supported amid talks that European and Asian central banks will ramp up monetary stimulus in the coming months to counter the negative economic shock by the British referendum last June 23.

Expectations for monetary stimulus tend to boost gold as the bullion is considered a safe-haven asset and inflation hedge.