Gold Heads Below $1,700 as Signs of Economic Turnaround Increase

© Reuters.

By Geoffrey Smith — Gold prices fell again on Wednesday as a stronger-than-expected ADP (NASDAQ:) report on private payrolls bolstered confidence in a speedy and vigorous economic recovery and left this year’s rally in bullion looking a tad tired.

ADP reported that private payrolls fell by a net 2.76 million in the month to mid-May, much less than the expected by analysts. The data suggest that the pace of re-hiring picked up during the month as statewide lockdown orders started to be relaxed.

The ADP numbers followed purchasing manager index readings out of Europe that also suggested the economy there had bottomed in April, while China’s service sector PMI rebounded into growth territory. So far this year, global data have tended to follow China’s in as much as it was the first to go into lockdown, and to emerge from it.

By 11:30 AM ET (1530 GMT), for delivery on the Comex exchange were down 2% at $1,699.95 an ounce, while was down 1.8% at $1,697.37 an ounce.  As such, it’s on course for its first close below $1,700 in over a month, and it’s over seven weeks since the yellow metal hit a new high.

for once got no support from the prospect of a pickup in industrial demand, falling 2.3% to $17.36 an ounce, while fell 0.5% to $864.10 an ounce. futures, a purer play on industrial activity, topped $2.50 a pound for the first time since early March, by contrast.

The prices of other haven assets – including the all-important dollar – also eased. U.S. Treasury yields rose by between three and nine basis points, pushing the yield curve steeper. The 2-10 year yield spread is now at its steepest since early 2018. That’s a configuration which – at least in pre-Covid times – has boded well for economic growth.

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Those looking for support for prices from easier monetary policy may yet get their wish at Thursday’s governing council meeting at the European Central Bank. The ECB is widely expected to say it will expand its pandemic-driven bond fund by another 500 billion euros ($560 billion).

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