Gold futures plunged below $1,900 in the middle of the trading week, driven mostly by the disarray surrounding fiscal stimulus in the United States. Gold prices have endured immense volatility in recent weeks, seesawing back and forth during this psychologically important level. Has this forced Wall Street to end its bullish sentiment surrounding the precious metal?
December gold futures plummeted $21.20, or 1.11%, to $1,887.60 per ounce at 16:49 GMT on Wednesday on the COMEX division of the New York Mercantile Exchange. Gold has shed about 0.9% over the last week, paring its year-to-date gain to below 25%.
Silver, the sister commodity to gold, is also trading in the red midweek. November silver futures fell $0.136, or 0.57%, to $23.785 an ounce. The white metal was doing well during the Monday trading session, but it has since plunged below the $24 threshold. But silver prices are still up more than 33% so far this year.
Precious metals are being mostly affected by President Donald Trump’s announcement on Tuesday that he has ordered his administration aides to end fiscal stimulus negotiations with House Speaker Nancy Pelosi. Although Trump is willing to sign legislation that would include $1,200 stimulus checks, it is unlikely that Pelosi would capitulate. She wants a $2.2 trillion bill to be approved, but the Republicans are calling for $1.6 trillion.
Soon after Trump tweeted his decision on Tuesday afternoon, US financial markets cratered, including the metals class. While the leading stock benchmarks have recovered, gold and silver have failed to rally.
The greenback had surged in the aftermath of the tweet, but the buck has erased most of its gains. The US Dollar Index, which measures the greenback against a basket of currencies, fell 0.1% to 93.59, from an opening of 93.83. A lower buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase. In this case, however, investors are seeking out assets with some yield since they are confident a deal will be done.
Meanwhile, investors are waiting for the minutes from last month’s Federal Open Market Committee (FOMC) meeting. Traders know what the Federal Reserve intends to do over the course of the pandemic-fueled recession, but the details from the September policy meeting could provide some more specifics.
Jeff Klearman, portfolio manager at GraniteShares, summarized the situation perfectly in an interview with CNBC:
Coronavirus-related demand destruction concerns are still abound, meaning sooner or later, a fiscal stimulus package will likely be passed and the Fed will continue its unprecedented accommodative monetary policy.
In other metal commodities, November copper futures surged $0.0665, or 2.24%, to $3.03 per pound. November platinum futures dipped $1.70, or 0.2%, to $868.60 per ounce. November palladium futures cratered $14.60, or 0.61%, to $2,376.60 an ounce.