Commodity Market: Gold trades near two-week lows as recovery optimism dulls safe haven demand

Gold prices remained close to a two-week low during European trade on Wednesday as demand for safe haven assets seemed to have faded on some optimism over economic activity recovery. Still, gold losses may be limited as rising US-China tensions remain a source of concern.

“What we saw over the preceding 24 hours was a break of relatively meaningful support at about $1,715,” DailyFx currency strategist Ilya Spivak said.

“The positive story seems to be easing of restrictions and (that) there will be some sort of rebound in economic activity… but, there is (also) a lot of negativity. Tension between the U.S. and China is a huge risk.”

US President Trump said on Tuesday that a strong US response to Beijing’s planned security legislation on Hong Kong was being prepared and he would announce it prior to this week’s end.

At 9:42 GMT today Spot Gold was retreating 0.24% to trade at $1,706.96 per troy ounce, after touching an intraday low of $1,704.39, or a price level not seen since May 13th ($1,699.26). Meanwhile, Gold futures for delivery in June were losing 0.50% on the day to trade at $1,696.90 per troy ounce, while Silver futures for delivery in July were down 0.01% to trade at $17.593 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was gaining 0.11% on Wednesday to 99.12, rebounding from yesterday’s three-week low of 98.90.

On today’s economic calendar, at 16:30 GMT Federal Reserve President for St. Louis James Bullard is expected to speak on “Views on the Pandemic from Onset to Reopening the Economy” and to participate in moderated question-and-answer session via webex to the C.D. Howe Institute, while at 18:00 GMT the Federal Reserve Bank is to release its ”Beige Book” report.

Market focus is likely to shift on Thursday’s US data on jobless claims, revised GDP and pending home sales, as investors will be looking for more clues on economic recovery.

Meanwhile, near-term interest rate expectations were little changed. According to CME’s FedWatch Tool, as of May 27th, 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, compared with a 98.6% probability a day ago.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,718.52
R1 – $1,728.13
R2 – $1,745.19
R3 – $1,754.80
R4 – $1,764.41

S1 – $1,701.47
S2 – $1,691.86
S3 – $1,674.80
S4 – $1,657.75