Futures Movers: Gold futures reverse after surging to record highs

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Gold futures reversed on Tuesday, with the yellow metal sliding after a rally to record highs.

With the lead contract as high as $1,974.40 an ounce overnight, gold futures GC00, -0.49% fell $23.80 to $1,907.20 an ounce.

China’s gold consumption fell 38% year-on-year in the first half of 2020, the China Gold Association said, news that may have contributed to the weakness on Tuesday.

Gold still has stormed higher over the last week, and gained more than 25% this year.

The rollout of the Senate Republican $1 trillion stimulus plan added to concerns about monetary financing of government spending, with the Federal Reserve on Tuesday starting its two-day interest-rate-setting meeting. The gains for gold also come amid the tense relationship between the U.S. and China.

Looking at the broader picture, analysts at BCA Research say the dollar’s weakness is just one factor behind gold’s rise, pointing out gold has climbed versus a host of currencies.

“The collapse in real yields has been the link between easy policy and gold. As central banks inject liquidity, real rates decline and the opportunity cost of holding gold recedes. Central banks remain successful in their easing attempt. Even if nominal yields are flat or slightly up, inflation expectations continue to rise and real yields to fall,” they said in a note to clients.

They said “gold will remain bid until Treasury yields TMUBMUSD10Y, 0.616% start taking off from their 0.6% readings.”

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