The prices of gold experienced a substantial decline on Monday, December 2, 2019, after indications of economic growth encouraged investors to focus their attention on riskier investments.
U.S. gold futures dropped by 0.5% to $1,465.30 an ounce. Spot prices fell by 0.3% to $1, 459.23 after reaching its highest pricing level since November 22 earlier in the trading session.
China’s factory activity returned to growth for the first time in seven months in November 2019 and beat analysts’ expectations. The manufacturing growth rate was the highest in three years. This lowered the demand for safe-haven assets like gold and turned investors to the stock markets. It is understandable given that China is the largest consumer of gold and the second-largest economy in the world. China also released a report showing an improvement in government data.
The precious metal is being pressured further by the slight strengthening of the U.S. dollar. The increase in the value of the greenback makes the bullion more expensive for investors who use other currencies.
The only positive for gold at this time is the uncertainty in the U.S.-China trade negotiations. It was reported that the preliminary agreement has been delayed because of the U.S. Senate’s passage of legislative measures that provided support to the Hong Kong protesters. In addition, China has reportedly demanded the rollback of U.S. tariffs on Chinese products as part of the first phase of the deal.
The 17-month-old trade dispute has already boosted the price of gold by 13% this year because it raised the demand for safe-haven assets.
According to ANZ analyst Daniel Hynes, the recent news on the trade front has not changed much compared to last week and the market still has no clues on the actual progress of the trade negotiations. The demand for gold is declining simply because of the lack of clear direction on the deal. He believes that market fundamentals still support the yellow metal and expects the gold price to return to an upward trend by year end.
Meanwhile, investors and traders are monitoring the release of U.S. manufacturing data later today.