Gold Posts Longest Slump of 2017 as Yield Gains Spur ETF Sales

  • U.S. dollar strengthens against most major currencies
  • Palladium futures post biggest two-day drop since 2015

Gold futures posted the longest slump in more than a month as a stronger dollar and equities near record highs lured away investors seeking higher returns. Industrial metals also fell.

A rally that pushed the Dow Jones Industrial Average above 20,000 for the first time, along with the stronger U.S. currency and Treasury yields close to the highest this year, reduced demand for the metal as an alternative asset. Holdings in SPDR Gold Shares, the largest exchange-traded fund backed by bullion, fell to the lowest since March on Wednesday.

Gold has slipped this week as solid corporate earnings buoyed confidence in the U.S. economic outlook. Investor optimism on President Donald Trump’s policies aimed at paring regulation, cutting taxes and keeping jobs within the U.S. borders is also curbing demand for haven assets such as bullion.

“It looks like gold will continue to see liquidation,” Frank Cholly, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “We’re seeing a greater appetite for risk-on.”

Gold futures for April delivery fell 0.7 percent to settle at $1,192.50 an ounce at 1:45 p.m. on the Comex in New York, and thirds straight loss and the longest slump since Dec. 22. The metal touched $1,186.60, the lowest for a most-active contract since Jan. 11.

“I’d be surprised if the market doesn’t test $1,170 over the next couple of weeks,” Cholly said.

Base Metals

Copper slipped with the stronger dollar and as China winds down before a week-long public holiday to mark the start of the Year of the Rooster in the Chinese lunar calendar. The Asian nation is the world’s biggest consumer of industrial metals.

Copper futures for March delivery declined 1.4 percent to $2.673 a pound on the Comex in New York. That’s the biggest drop since Jan. 17. The metal is down 6.7 percent this year.

With Chinese traders out of the market and the dollar moving higher, “you get the negative flows,” Mike Dragosits, senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “Copper has run much too far, too quickly. Our short-term view is copper is due for a bit of a correction.”

In other metals:

  • Silver futures also fell on the Comex. Palladium declined on the New York Mercantile Exchange, while platinum was unchanged. 
  • Palladium futures have dropped 9 percent since Tuesday, marking the biggest two-day loss since Aug. 25, 2015.
  • Aluminum, copper, lead, nickel, tin and zinc slipped on the London Metal Exchange.
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