Gold prices drifted lower on Monday while base metals and bond yields resumed their march higher as political risks in both the U.S. and Europe abated.
Money poured out of haven assets and into risk-sensitive ones such as stocks and other commodities as investors took heart from the phase 1 trade deal with China that averted fresh import tariffs coming into effect at the weekend, even though it did little to undo the economic damage already done by an 18-month trade war.
By 11:10 AM ET (1610 GMT), for delivery on the Comex exchange were down 0.1% at $1,479.15 a troy ounce, while was little changed at $1,479.05 an ounce.
Held up better, rising 0.1% to $17.03 an ounce, while rose 0.1% to $930.05, outperforming on the basis that both have industrial as well as investment uses.
However, on a risk-on day, pure industrial metals performed even better: rose 1.1% to $2.812 a pound, just below the seven-month high they hit on Friday in response to the trade news.
“ continues to provide the cleanest story for those who are upbeat about global growth in 2020,” J.P. Morgan) analyst Natasha Kaneva wrote in a weekly note. She argued that speculative positions on the Chicago and London exchanges which have been on balance short for most of this year turned net long last week.
“The question now remains if the outlook has improved enough to see the return to a sustained speculative long position,” Kaneva said. She implied that with global growth still far from the synchronized strength that drove the last rally in 2017/18, the answer is probably no – she sees fair value at between $5,900 and $6,170 a ton on the LME. On Thursday it was already trading at $6,186.75.
Data released earlier pointed to a bottoming out of the slowdown in China and Europe, rather than a real rebound. China’s retail sales and industrial production picked up a little, but business surveys showed Europe’s factory activity still shrinking. Business surveys in the U.S. – the Empire State Manufacturing Index and IHSMarkit’s manufacturing PMI — sent mixed signals.
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