Gold on track for steepest weekly drop since November
The precious metal is down 3.2 per cent over the week to $1,227.87 a troy ounce, after touching its lowest level in 7 weeks on Thursday. Gold is now set for its third consecutive week of declines.
Diminishing demand for haven assets has been a key factor for declining gold prices, with the precious metal falling 4.4 per cent since the first round of the French elections. Indeed, gold could fall further if Emmanuel Macron defeats right-wing rival Marine Le Pen, who has proposed leaving the euro, in the second round run off on Sunday.
With the fear trade easing, sentiment was dampened further after a report from the World Gold Council showed that global demand was down 18 per cent from a year ago. Purchases by central banks slowed 27 per cent from a year ago to 76.3 tonnes in the first quarter. Meanwhile, inflows into gold-backed ETF’s declined by 68 per cent to 109.1 tonnes from a year ago, and overall investment demand fell 34 per cent.
Moreover, the Federal Reserve is widely expected to raise interest rates when it meets next month, following the US jobs report on Friday. The prospect of higher rates also tends to weigh on gold, which offers no yield.
Despite the recent sell-off, gold prices are up more than 7 per cent so far this year. Some analysts caution that it could slip back below $1,200 a troy ounce by the end of the second quarter.