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Gold sees biggest one-day fall in 3 weeks as pound gains ground

As Britain welcomes new PM, tensions are easing. Meanwhile, demand for gold and other safe havens is decreasing. Photograph: (Reuters)

Reuters London, United Kingdom Jul 13, 2016, 06.54 AM (IST)
Gold saw its biggest one-day fall in three weeks yesterday as global equities rallied on easing political uncertainty in Britain and hopes for more economic stimulus, which in turn curbed demand for assets perceived as safe havens.

Spot gold fell as much as 1.9 pe rcent to $1,329.75 an ounce and was down 1.6 pct at $1,332.86 by 2:20 p.m. EDT (1820 GMT). 
The most active US gold futures for August delivery settled down 1.6 per cent at $1,335.30 per ounce. 

"Tensions in Britain are easing for now, as the country will soon have a new Prime Minister," ActivTrades chief analyst Carlo Alberto de Casa said, referring to incoming Prime Minister, Theresa May, who will replace David Cameron on Wednesday.

"With the British pound gaining some ground, demand for gold and other safe havens is decreasing," he said.

Gold has gained about $100 an ounce since Britain voted recently to leave the European Union, with worried investors piling their cash into safe-haven assets. 

"The UK has a leader and we almost have the outlines of a plan," said Rob Haworth, senior investment strategist for US Bank Wealth Management in Seattle, describing a "risk-on day" pressuring prices despite a weak U.S. dollar.

Profit-taking and new highs in the US stock market also weighed on bullion, Haworth said.

Major US stock indexes set record intraday highs on Tuesday as optimism about the world economy and upbeat corporate results from Alcoa boosted risk appetite, while European shares rose for a fourth straight day. 

Japan's ruling coalition fanned expectations of more fiscal stimulus, while the Bank of England could cut rates as soon as Thursday following its monthly policy meeting.

"The additional stimulus packages will continue to create a challenging environment for investors looking for a return because they are not getting it through bonds and as long as we have that scenario, then the alternatives are currently stocks but also precious metals,"
Saxo Bank senior manager Ole Hansen said.

Markets were also assessing whether the latest US jobs data, which was stronger than expected, has boosted the prospects for an interest rate increase by the US Federal Reserve.

The European Central Bank will not ease monetary policy any further at its meeting next week, according to an overwhelming majority of respondents in a Reuters poll of euro money market traders.
Silver was down 0.65 per cent at $20.13 an ounce. 

Platinum fell for the first time in two weeks, down 1.14 per cent at $1,087. Palladium rose 1 per cent to $627.50.

(Reuters) 
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