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Gold dives below $1,800 on optimism for economic recovery

11/27/2020 | 12:24pm EST
Gold bars are pictured on display at Korea Gold Exchange in Seoul

(Reuters) - Gold slumped 2%, breaking below the key $1,800 support level to a near five-month trough on Friday, as growing optimism about a quick vaccine-fuelled economic recovery and a smooth White House transition powered share market to fresh records.

Spot gold slid 1.4% to $1,785.11 per ounce by 11:43 a.m EDT (1643 GMT), earlier falling to its lowest since July 6 at $1,773.10 an ounce.

The metal has shed about 4.7% so far this week, the most since the week of March 13.

U.S. gold futures slipped 1.2% to $1,784 an ounce.

"As soon as prices touched below the key $1,800 level, it triggered a sell-off. It is probable that prices might test the $1,750 level given we have a strong fundamental reason like the vaccine," said OANDA analyst Craig Erlam.

Gold prices have declined about 15% from record peak https://fingfx.thomsonreuters.com/gfx/ce/rlgvdabxnpo/Gold%20Nov%20low.PNG

Further weighing on gold, U.S. equities raced to a record on the vaccine optimism and as investors bet on calmer global trade under a Joe Biden administration in the United States.

"It is believed that Biden will take a calmer approach towards trade with other countries like China and that is getting reflected in the stock market," said Natixis analyst Bernard Dahdah.

U.S. President Donald Trump said on Thursday that if the Electoral College votes for Biden, he will leave the White House, paving the way for Biden to formally take up the presidency.

"However, with ultra-low interest rates and prospects of more stimulus in the economy, gold looks robust in the longer term," Dahdah said.

The economic impact of the COVID-19 pandemic has led global central banks to keep interest rates at a minimum.

Along with that, massive amounts of stimulus into the economy has raised concerns of a higher inflation, helping gold gain more than 17% so far this year.

In other metals, silver dropped 3.4% to $22.65 per ounce and was set to post a 6.3% weekly fall.

Platinum rose 0.3% to $964.86 and palladium gained 1.7% to $2,424.56.

(Reporting by Diptendu Lahiri and Swati Verma in Bengaluru, Editing by Chizu Nomiyama and Timothy Heritage)

By Diptendu Lahiri


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
GOLD 0.92% 1856.87 Delayed Quote.-2.45%
NATIXIS 0.99% 3.158 Real-time Quote.12.23%
PALLADIUM 0.33% 2308 Delayed Quote.-5.32%
SILVER 5.07% 26.516 Delayed Quote.-3.41%
THE PLATINUM GROUP PUBLIC COMPANY LIMITED -2.29% 2.56 End-of-day quote.4.07%
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