Commodity Market: Gold edges lower for a second straight day as economic recovery optimism restrains safe haven demand

Gold prices drifted lower during Tuesday’s European trade, after the precious metal had drawn support in the previous sessions by tensions between Beijing and Washington over proposed new security laws on Hong Kong.

While China’s foreign ministry office in Hong Kong and the city’s security chief spoke in defense of the proposed legislation and proclaimed certain acts during last year’s mass protests as terrorism, a White House official warned that US sanctions might follow.

“The key supportive factor for the (gold) market is rising tensions between China and the U.S.; and if we see a further escalation, we would see another move higher in gold,” ING analyst Warren Patterson said.

On the other hand, lockdown restriction easing seemed to have limited upside for the yellow metal, with optimism over a swift economic recovery setting in. Risk-on mood was also supported by the latest survey on German business sentiment, which showed a rebound in May following April’s steepest drop on record.

At 9:42 GMT today Spot Gold was retreating 0.32% to trade at $1,723.78 per troy ounce, after touching an intraday low of $1,722.10, not far from the low recorded on Monday. Meanwhile, Gold futures for delivery in June were losing 0.76% on the day to trade at $1,722.35 per troy ounce, while Silver futures for delivery in July were up 0.81% to trade at $17.837 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was retreating 0.44% on Tuesday to 99.37, after slipping to 99.35, or a level not seen since May 21st (99.02).

In terms of economic calendar, today’s focus will be on US consumer confidence and new home sales reports at 14:00 GMT, while at 17:00 GMT Fed President for Minneapolis Neel Kashkari is expected to speak on ways to begin reopening the economy safely in a virtual discussion hosted by NBC’s Tom Brokaw at the University of Minnesota conference on “Living in a Covid-19 World: A discussion with leading health and economic experts”.

Meanwhile, near-term interest rate expectations were unchanged. According to CME’s FedWatch Tool, as of May 26th, investors saw a 99.3% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting in June, unchanged from May 22nd.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,728.28
R1 – $1,735.35
R2 – $1,741.52
R3 – $1,748.59
R4 – $1,755.66

S1 – $1,722.11
S2 – $1,715.04
S3 – $1,708.88
S4 – $1,702.71