Gold Falls as Spring Holiday, Vaccine Hopes Bring out Risk-on Mood

By Geoffrey Smith 

Investing.com -- Gold prices fell on Tuesday as the U.S. and U.K. returned from long holiday weekends in optimistic moods, confident of a robust economic rebound and a quick breakthrough in the search for a vaccine to treat the Covid-19 coronavirus.

By 11:35 AM ET (1535 GMT), gold futures for delivery on the Comex exchange were down 1.5% at $1,710.00 a troy ounce, as investors moved money out of havens into riskier assets such as equities and industrial commodities. Spot gold was down 0.5% at $1,715.12, the first time it has traded above the benchmark futures contract in months. Physical constraints that led to futures enjoying a premium of over $50 at times in March and April have now, it seems, completely unwound themselves.

Silver futures prices again outperformed, even on the way down, losing only 0.3% to $17.64 an ounce, while platinum futures lost 1.2% to $875.70 an ounce.

“Silver and platinum were more aggressively sold off than gold during the panic wave in March,” Georgette Boele, commodity analyst with ABN AMRO (AS: ABNd ), wrote in a monthly note to clients. “As a result, prices were at relatively attractive levels.”

The gold/silver price ratio has now dropped to below 97, from a high of 127 in March.

Elsewhere Tuesday, government bond prices also fell, driving yields higher in both the U.S. and Europe. The 10-year U.S. Treasury note yield rose four basis points to 0.70%, its highest in nearly a week, while its German counterpart rose six basis points to a one-month high of -0.43% and spreads to riskier eurozone sovereigns tightened considerably.

The Italian 10-year premium over German fell below 200 basis points for the first time in seven weeks, as expectations strengthened that the European Commission will be able to force through a multi-billion recovery plan for the EU economy that includes a much greater degree of direct fiscal support for the bloc’s more challenged members.

Economic data only gave qualified support to the risk-on move, however. The Conference Board’s index of U.S. consumer confidence ticked up only marginally from last month’s downwardly-revised 85.7 to 86.6, below consensus expectations of 88.

The bounce in German consumer confidence in May, announced earlier, had likewise fallen short of expectations.  

Only U.S. new home sales , nearly stable at 623,000 in April, were clearly better than expectations.