On May 25, Gold plummeted as the Japanese equities surged on the news that there might be a potential stimulus package. That development boosted investors’ risk appetite, although fresh tension over Hong Kong limited the metal’s drop.
Spot gold lost 0.5% at $1,726.18 per ounce by 0512 GMT. Also, the US gold futures fell 0.5% to $1,726.60. IG Markets analyst Kyle Rodda said:
“I think the play into stocks and other risk assets has probably supported the risk appetite and diminished the appeal for Gold in the short term. There still seems to be the broad issue of gold prices trying to break too far above the $1,740, $1,750 mark.”
On May 22, Gold surged as much as 0.8% to touch $1,739.51 before it pared these gains. Japan seems to be considering fresh stimulus worth at least $929 billion. According to the Nikkei newspaper, the stimulus is mainly comprised of financial aid programs for the different companies hit by the COVID pandemic. Japan’s Nikkei gained 1.5% following the report.
Gold Price Drivers
Looking at the return of political uncertainty, many people rallied on Sunday protesting against Beijing’s plan to impose various national security laws on Hong Kong. These proposed national security legislation for Hong Kong might result in US sanctions. Also, they may threaten the city’s popular status as a financial hub, as explained by White House National Security Adviser Robert O’Brien said on May 24.
Gold is considered a haven asset during economic and political uncertainties. SPDR Gold Trust holdings, reflecting investor sentiment, rose 0.4% to 1,116.71 tonnes on May 22. SPDR Gold Trust is the biggest gold-backed exchange-traded fund globally.
Speculators and investors increased their bullish positions in COMEX gold and the silver contracts in the week that ended on May 19. The US Commodity Futures Trading Commission published these reports on May 22.
In general, trading is expected to remain subdued with the UK, and US markets shut for public holidays. Palladium lost 0.1% to $1,944.06 per ounce while platinum was down 1.5% at $827.12. Notably, silver also lost 0.6% to $17.08.