- Metal declines second day as central banks may offer support
- Bank of England may cut rates after U.K. secession vote
Gold dropped the most in seven weeks as stock markets climbed on speculation that policy makers will act to spur growth, easing concerns on the global economy after the U.K.’s vote to leave the European Union.
Global equities erased losses sparked by the Brexit vote. The pound rose the most since the referendum as Theresa May prepared to take over as the U.K.’s next prime minister, while Japanese Prime Minister Shinzo Abe vowed to speed up efforts to defeat deflation. A gauge of U.S. small-business optimism rose for a third straight month in June.
Gold has gained this year as signs of a shaky global economy spurred demand for haven assets. Rallying equities and signals from central bankers may be helping stem those worries. St. Louis Federal Reserve President James Bullard said Tuesday that while he expects the U.S. economy to remain stuck in low-growth mode for two to three years, there was no reason to forecast a recession.
“Everybody’s going to keep looking at record stock market highs,” George Gero, a managing director at RBC Wealth Management in New York, said in a telephone interview. “All of this is a recipe for a pullback for gold.”
Gold futures for August delivery slid 1.6 percent to settle at $1,335.30 an ounce at 1:47 p.m. on the Comex in New York, the biggest decline since May 24. The decline was the fourth straight, the longest stretch in two weeks.
Bullion will remain supported by low interest rates and a weaker dollar, Tetsu Emori, president of Emori Capital Management Inc., said Tuesday. Traders see 37 percent odds that the Fed will raise U.S. interest rates by December. Higher rates curb the appeal of precious metals, which don’t offer yields.
“The markets seem to be relatively risk-on,” Emori said. “In that sense, the money should be coming out from the gold market to the equity market.”
In other metals:
- Silver futures for September delivery slid 0.7 percent to $20.171 an ounce on the Comex.
- On the New York Mercantile Exchange, platinum dropped and palladium rose.