By Geoffrey Smith
Investing.com -- Gold prices drifted below $1,700 again on Wednesday to their lowest in a week, as the dollar strengthened amid concerns over the sustainability of the recent strength in risk assets.
With equity markets flagging after their best month in years, and with oil prices also hit by short-term profit-taking, trading in havens was choppy, as economic data and some mixed corporate updates urged caution.
By 11:30 AM ET (1530 GMT), gold futures for delivery on the Comex exchange were down 1% at $1,693.50 an ounce, while spot gold was down 1% at $1,689.52 an ounce.
Silver futures were down 0.3% at $15.07 an ounce, while platinum futures were down 2.5% at $765.10.
Gold prices have been consolidating now for over five weeks after hitting an eight-year high in early April, unable to make new highs despite a steady flow of investor money into gold-backed exchange-traded funds. Holdings in SPDR Gold Trust (P:GLD), the world’s largest gold-backed ETF, rose 0.4% to 1,076.39 tons on Tuesday, their highest since April 2013.
Nor did they get much support on Wednesday from economic data that reinforced expectations of a long period of low or negative real interest rates. The European Commission’s spring economic forecasts predicted that the eurozone economy will shrink by 7.7% this year, while in the U.S., ADP’s report on private-sector employment showed the U.S. shed over 20 million jobs there in April.
St. Louis Federal Reserve President James Bullard told CNBC earlier that he expects Friday’s official labor market report to be “one of the worst ever”, with the unemployment rate close to 20%. He added that the rate could come back below 10% by the end of the year if the support measures enacted since March work.
In other havens, U.S. Treasury yields rose as the market positioned itself for an unprecedented wave of issuance over the next two months, while German 10-year yields jumped seven basis points to 0.51% after the government in Berlin agreed further relaxation of the country’s lockdown measures.
The government has also squarely backed the European Central Bank after the ECB was upbraided on Tuesday by the German Constitutional Court.