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Gold Falls as Weak Data Dent Broader Market Sentiment Again

Published 15/04/2020, 16:16
Updated 15/04/2020, 16:21
© Reuters.

© Reuters.

By Geoffrey Smith 

Investing.com -- Gold traded like a risk asset again on Wednesday, falling alongside oil and equities while other haven assets rallied against a backdrop of dismal economic data.

By 11:15 AM ET (1515 GMT), gold futures for delivery on the Comex exchange were down 1.5% at $1,742.60 a troy ounce, a drop of more than $20 on the day. Spot gold was down 0.5% at $1,718.63.

Silver futures were also 2.9% lower at $15.66 an ounce, while platinum futures were down 1.9% at $804.45. All were hit by a sharp bounce of nearly 1% in the dollar from a three-week low.

The selloff happened largely on the back of U.S. economic data, which showed the sharpest ever monthly decline in retail sales in March as consumers faced the prospect of unemployment or reduced pay.

In addition, U.S. industrial production fell at its sharpest rate since 1946 with a drop of 5.4% and manufacturing output fell by 6.3%, while the New York Empire State Manufacturing index fell to its lowest-ever level at -78.2.

All of the numbers were worse than the consensus of analysts polled by Investing.com.

“Further big drops are likely in April, because lockdowns began to bite hard only in mid-March, so roughly half the month was largely unaffected by the virus crisis,” said Pantheon Economics’ chief economist Ian Shepherdson in a note to clients.

The move in gold stood in sharp contrast to that in other haven assets. U.S. Treasury bond yields fell across the curve, with 10-Year and 30-Year yields falling over 10 basis points. In Europe, ultra-defensive German 10-Year Bunds hit their lowest yield in two weeks, despite signs that the country is preparing a modest relaxation of its lockdown measures.

However, the yield spreads of other eurozone countries widened amid growing doubts about the post-crisis landscape, when eurozone members will still be wholly liable for even higher debts – which will need to be serviced by economies that have shrunk in the meantime. The spread between Italian and German 10-year yields widened 21 basis points to 235 basis points, while Portuguese and Spanish spreads widened by 11 basis points each.

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