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Gold Prices Fall as Risk Appetite Returns to Global Markets

Published 02/12/2020, 12:21 AM
Updated 02/12/2020, 12:40 AM
© Reuters.
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By Geoffrey Smith

Investing.com -- Gold prices fell on Tuesday as global markets returned to risk-on mode after China reported ‘a 19% drop in confirmed new cases of the coronavirus, raising hopes that the outbreak will peak before too long even though the death toll now tops 1,000.

On Capitol Hill, meanwhile, Federal Reserve Chairman Jerome Powell indicated that there would be no imminent changes to U.S. monetary policy against the current backdrop of solid economic data.

He added that the Fed was “closely monitoring” the outbreak for any signs of effects on the U.S. economy.

“The question is: ‘are they persistent?’ and ‘are they material?’” Powell said.

By 11:20 AM ET (1620 GMT), gold futures for delivery on the Comex exchange were down 0.8% at $1,567.65 a troy ounce, while spot gold was down 0.5% at $1,564.50.

Prices got little support from a Market News story citing unnamed people as saying that various members of the European Central Bank’s governing council were already arguing for a further cut to interest rates, fearing a more immediate impact from the coronavirus. The story was published after a speech by ECB President Christine Lagarde in which she told EU lawmakers that the ECB “can’t and shouldn’t be the only game in town.”

Lagarde’s chief economist Philip Lane is due to speak in Berlin at 12 PM ET (1700 GMT).

Elsewhere in his testimony, Powell said he expected the Fed to continue buying bills throughout the second quarter, and to stay active in the repo market at least through April, in line with previous statements. Many have seen the Fed’s money market operations as an undeclared form of quantitative easing, a characterization that the Fed rejects.

Earlier, the monthly JOLTS survey showed the number of U.S. job openings fall to a two-year low, suggesting that the recent strength of job creation may not last. The data didn’t have much impact on haven assets, however, with the 10-year U.S. Treasury bond yield rising five basis points to 1.59%. Yields rose by a similar amount all across the yield curve.

Earlier, expectations of an interest rate cut in the U.K. faded slightly after data showing that gross domestic product grew slightly faster than expected in the fourth quarter. The data have in any case been largely superseded by a round of upbeat sentiment surveys since the start of the year. Bank of England Governor Mark Carney said any further actions would have to take into account the U.K. government’s annual budget in March. Prime Minister Boris Johnson earlier on Tuesday committed the government to what will be the world’s most expensive railway project, known as HS2.

Among other metals, silver futures were down 1.2% at $17.26, while platinum futures were up 0.8% at $974.55.

Copper futures extended their recovery after their sharp drop in recent weeks, rising 1.6% to $2.59 a pound. They’re still down 7.4% year to date, however.

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