Metals Stocks: Gold Rally Mostly Fades In Step With Tempered Syrian, Trade-war Worries

Published date: .

Gold prices bobbed in and out of negative territory Monday as stocks headed higher in a relief rally pinned on hopes the U.S. may not be dragged into a deeper conflict with Syrian allies Russia and Iran, dulling demand for haven assets overall.

Gold did briefly pare losses after a round of mixed economic data, though those reports were seen doing little on their own to dissuade the Federal Reserve from modest, gold-negative interest-rate hikes over coming months.

In recent trading, June gold GCM8, +0.13% changed hands little changed near $1,348.10 an ounce. As geopolitical concerns and trade-picture uncertainty dogged financial markets, gold had logged modest back-to-back weekly gains through Friday, according to FactSet data. But inconsistency persists; prices had climbed nearly 1.1% on Wednesday to the highest finish since late January, only to fall back by 1.3% Thursday.

Gold sputtered to start the new week even as the dollar mostly weakened, challenging their typically inverse relationship. The ICE U.S. Dollar Index DXY, -0.45% which measures the greenback against six major rivals, traded down 0.3% at 89.53. U.S. stocks, meanwhile, were expected to open with considerable gains.

Markets have tempered their reaction to news the U.S. joined with allies France and Britain to launch missiles late Friday that destroyed much of Syria’s chemical-weapons capabilities. The strikes left much of President Bashar al-Assad’s conventional military facilities intact, easing immediate fears of an escalation in tensions with Russia, a backer of Syria’s regime. On Sunday, Assad’s forces unleashed fresh airstrikes against rebels in a demonstration of his regime’s continued strength.

Still, Russian stocks and related exchange-traded funds were under some pressure after reports the Trump administration will target the country with more sanctions, this time based on companies linked to the Assad regime and chemical weapons.

Gold is “reacting hardly at all to the U.S.-led military strike against Syria which, according to U.K. Foreign Secretary Boris Johnson, was a one-off action, with no further attacks planned. What is more, market participants appear to be attributing little weight to the announcement of Nikki Haley, the U.S. Ambassador to the United Nations, who said that the U.S. will impose further economic sanctions on Russia for its role in Syria,” said Carsten Fritsch, commodities analyst at Commerzbank.

Haven demand for gold may be showing up in ETF flows, however, he said. Gold ETFs registered inflows of 16.6 tons last week and of no less than 36 tons since the beginning of the month, the Commerzbank team noted. This is already nearly twice as much as in all of March. By contrast, speculative financial investors left their net long positions more or less unchanged in latest week. “Investors are slowly beginning to show increased buying interest in response to the geopolitical risks and resulting uncertainty,” Fritsch said.

As for ETF trade early Monday, the SPDR Gold Shares GLD, +0.22% slipped 0.1%. The iShares Silver Trust SLV, +0.38%  eased 0.2%, while the VanEck Vectors Gold Miners GDX, +0.04%  was steady.

May silver SIK8, +0.28% futures slipped 0.3%, or about 5 cents, to $16.61 an ounce. The contract put up a roughly 1.8% weekly gain last week.

Read: Global economic growth was a blessing and curse for 2017 silver demand

As the interest-rate watch continues, reports on retail sales showed the first gain in four month months in March, though a more tempered result when car sales were excluded. The Empire State Manufacturing Survey for April showed a retreat from March’s reading.

Read: Americans are spending again after lying low for a few months

The home builders’ index for April is scheduled to come at 10 a.m. Eastern. A reading on business inventories in February is expected at 10 a.m. Eastern, too.

Atlanta Federal Reserve President Raphael Bostic will speak on the economy at 12:15 p.m. Eastern.

Meanwhile, Minneapolis Fed President Neel Kashkari said he expects the central bank will soon reach its 2% objective, making it easier to push on with interest-rate hiking plans, in an interview with The Wall Street Journal that was published Monday.

In other metals trading, May copper HGK8, +0.96% rose 0.3% to $3.079 a pound after settling up 0.4% on the week. July platinum PLN8, +0.15%   shed 0.1% to $932.00 an ounce after a weekly rise of 1.7%. June PAM8, +1.69%  ended at $984.35 an ounce, after surging about 9.6% for last week.