Gold down more than 5% in less than a week

by Sybilla Gross

Gold fell further from last week’s record high as easing trade tensions instill new risk appetite into global markets.

Bullion slid as much as 1.6% to touch $3,268, and has lost more than 5% since peaking above $3,500 on Wednesday. 

Investors acted on signs of a thaw in US trade talks, after President Donald Trump on Friday suggested another delay to his higher “reciprocal” tariffs was unlikely. In this context, Asian nations may strike interim deals to stave off levies before the 90-day grace period ends in July. The Trump administration has drafted a framework to handle negotiations with about 18 countries. 

While “a nervous sense of calm has returned” in the global marketplace, “the idea that multiple deals could be wrapped up within weeks seems overly optimistic,” said Charu Chanana, a strategist at Saxo Capital Markets Pte.

The selloff accelerated as traders bet on signs that gold’s explosive rally may have run too hard and too fast. In New York, hedge fund managers cut their net long futures and options positions on the metal to the lowest level in 14 months, the latest Commodity Futures Trading Commission data show. 

Shifts in options positioning — which last week saw trading volumes on the SPDR Gold Shares ETF surpass a record 1.3 million contracts — could point to an overheated market in the short term as prices run ahead of fundamental drivers including dollar and real rates, according to Barclays Plc.

Still, the precious metal remains up by about 25% this year — outperforming nearly ever other major asset class — as Trump’s aggressive trade policy and fears about the global economy spurred demand for haven assets. The gains have also been supported by inflows into bullion-backed exchange-traded funds, central-bank buying and signs of strong speculative demand in China, even as physical consumption in the world’s biggest buyer falls.

Gold for immediate delivery fell 0.8% to $3,293 at 2:04 p.m. in Singapore, after declining 0.2% last week. The Bloomberg Dollar Spot Index was down 0.1%. Silver and palladium declined, while platinum was little changed.