Gold steadies with US, Iran stepping back from the brink

Gold dropped for a second day as the US and Iran stepped back from a deeper military conflict, blunting the appeal of haven assets.

The metal is heading back toward levels it was trading at before the US killed top Iranian general Qassem Soleimani last week. President Donald Trump’s latest remarks suggested tensions were easing and stocks rose across Europe and Asia.

“Job done,” Rhona O’Connell, head of market analysis for EMEA and Asia at INTL FCStone, said in a note. “The price is now back to where we started.”

Spot gold fell as much as 1 per cent to $1,540.33 an ounce, only $11 higher than the closing price the day before the US strike. The metal is poised for the first back-to-back loss since November 25.

Bullion-backed exchange traded funds also saw a sell off on Wednesday, with holdings dropping the most since November, according to preliminary data from ETFs tracked by Bloomberg.

Gold looks “somewhat vulnerable” now, given how overbought it’s been recently, said David Govett, head of precious metals trading at Marex Spectron Group. “Focus will now return to economic drivers as opposed to conflict worries.”

As tensions ease, investors will be weighing the outlook for the US economy and whether any change is likely in monetary policy from the Federal Reserve, which cut rates three times in 2019 before pausing. On Friday, traders will get the latest monthly nonfarm jobs report.

There’s still very strong demand for gold “due to a host of financial, geopolitical and monetary risks,” said Mark O’Byrne, research director at GoldCore Ltd.

In other precious metals, platinum was little changed and silver dropped below $18 an ounce.

Palladium touched a fresh record of $2,148.81 an ounce earlier Thursday before paring some gains as China reported a second straight annual slump in car sales. The metal is still up 8.6 per cent this year.

“An ongoing deficit should justify further gains in palladium prices this year,” Metals Focus said in a note this week. “That said, calling the market’s top is tricky given the speed of the rally and the fact that the palladium market is comparatively small and hence relatively inelastic.”