Gold Drops to Two-Week Low as Equity Advance Curbs Haven Demandby and
Stock markets supported by better-than-estimated earnings
Gold still up 26% this year amid Brexit fallout, Fed outlook
Gold dropped to a two-week low as high-flying equities, fueled by better-than-estimated earnings that pointed to economic resilience, damped the metal’s appeal as a haven.
U.S. share prices have added almost $2 trillion since June 27 as lessening concern about economic growth combined with speculation that the Federal Reserve will hold off raising interest rates. Gold declined in five of the last six trading sessions and is on pace for its first weekly loss since May.
Gold is still up 26 percent this year as the fallout from the Britain’s vote to exit the European Union and the expectation of Japanese and U.K. stimulus boosted the appeal of the metal as a store of value. Lower rates benefit gold because it doesn’t pay interest like competing assets such as bonds or equities.
“The stock market is making new all-time highs and that’s been the case all week,” Tim Evans, chief market strategist at Long Leaf Trading Group Inc. in Chicago, said by phone. “So money is leaving safety markets.”
Gold futures for August delivery dropped 0.8 percent to settle at $1,332.20 an ounce at 1:37 p.m. on the Comex in New York, after touching $1,320.40, the lowest intraday since June 30.
The U.S. economy shouldn’t sustain much damage from the Brexit vote and may warrant as many as two interest-rate increases before the end of the year, Federal Reserve Bank of Philadelphia President Patrick Harker said Wednesday. Traders are pricing in a 6 percent probability of a rate increase at this month’s policy meeting. Odds of a move in December are 35 percent.
In other precious-metals news:
- Holdings in gold-backed exchange-traded funds rose by 1.1 metric tons to 2,003.1 on Wednesday, data compiled by Bloomberg show.
- Silver futures for September delivery fell 0.4 percent to $20.322 an ounce on the Comex.
- On the New York Mercantile Exchange, platinum and palladium gained.