Gold Loses Luster On Economic Optimism, Anti-Pandemic Aid

Investor sentiment is growing bullish on the economic front following upbeat financial reports, stimulus efforts and the easing of lockdown restrictions. Notably, better-than-expected data on job losses and the services sector perked up markets, thereby boosting investor optimism on an economic rebound.

Hopes of an economic recovery whetted investors’ appetite to turn risk prone and thus be exposed to much more vulnerable bets such as stocks at the cost of safe-haven assets like gold and bonds.

Gold Prices Depreciate

Gold prices slid for the third straight week on Friday. Bullion dipped 1% this week, marking its steepest fall since the week ending May 1.
Gold ETFs mostly move in tandem with gold prices. The SPDR Gold Shares (GLD) has lost 3.3% in the past three weeks while iShares Gold Trust (IAU),is down 3.5% over the same time period.

Factors Cheering Investors

Investors overlooked the civil unrest that spread like wildfire across the country and rather chose to focus on the economic upturn.  

Resilient global equity markets and positive economic information indicate that the worst will soon be over. Despite the unceasing U.S.-China tensions, and fears of a second wave of the coronavirus infection to hit the nation soon, investors seeking refuge in safe-haven assets can certainly see a halo of hope around stocks that are starting to display an upbeat momentum.

Additionally, the steady reopening of states and cities along with anticipations of an economic reboot in the second half of this year have been retaining investors’ faith.

Per a survey report, factory activity in China resumed growth in May as restrictions were relaxed. However, the improvement was marginal. Meanwhile, in the United States, manufacturing activity inched up from an 11-year low, suggesting that the severest phase in the coronavirus-led economic crisis can be overcome in the months ahead.

Joblessness to Decelerate

Data from Automatic Data Processing Inc., showed the private sector shed 2.76 million jobs in May. That was well below forecasts from economists surveyed by Econoday who expected a loss of 8.66 million. In April, the private sector shed 19.56 million jobs.  

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Mad Money 10 months ago Member's comment

Let's just forget about the trillions in funny money.