Gold slides 2pc, silver sheds 4pc on trade optimism, strong US data

05 Sep, 2019

Spot gold fell 2.3pc to $1,517.20 per ounce at 1:47 p.m. EDT (1747 GMT) and silver fell 4.2pc to $18.74 per ounce, after earlier dipping as low as $1,509.03 and $18.48, respectively. Both precious metals were set for their worst daily percentage decline in more than 2-1/2 years.

US gold futures settled down 2.2pc at $1,525.90 per ounce.

Platinum also declined about 2.3pc to $963 per ounce, after touching a low for the day at $940.50.

Data showing US private employers' payrolls rose and the growth of the US services sector accelerated in August boosted stock markets, which were already buoyed by positive signs on US-China trade.

"The gold market trading at highs was ambushed by strong US data from ADP to ISM; the data also savaged a frothy bond market, which helped drive the slide in gold," said Tai Wong, head of base and precious metals derivatives trading at BMO.

Driving hopes of a thaw in the protracted dispute between the world's two largest economies, China's Commerce Ministry confirmed high-level trade discussions with the United States set for early October.

"The risk sentiment that was sparked by the ebbing trade situation is leading gold market participants to take some of their bets off," said Daniel Ghali, commodity strategist at TD Securities.

The changes in gold and Treasury yields are both symptoms of the same economic circumstances, Ghali said. "The longer yields are rising because growth expectations are."

Treasury yields jumped on the positive developments on US-China trade as well as the strong US data.

Investors will now turn their attention to the US nonfarm payrolls data on Friday for further clarity on the health of the US economy.

With additional positive payrolls data, "you could see a further retreat from bonds and gold," BMO's Wong said.

"But barring a stunning trade resolution it remains a bullish bond market in the US due in large part to the fact that yields in the rest of the developed world are practically non-existent. Gold might correct but the overall positive outlook will remain," Wong added.

Palladium was the sole gainer, rising 0.6pc to $1,562.93 per ounce, having hit its highest level in more than 1-1/2 months at $1,567.68 earlier in the session.

Copyright Reuters, 2019

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