Gold continued its downward trend for a second day, falling from the highest level in three weeks on reduced demand for havens as world equities rallied following positive Chinese trade data.
The metal headed for its first back-to-back retreat in more than a week after reaching £888.56 an ounce on Tuesday, its peak since March 18. It moved down alongside the Japanese yen as a measure of global shares erased losses for the year. Conflicting messages from Federal Reserve regional bank presidents also weighed on the metal.
Global stocks hit back on Wednesday after data showed China’s exports jumped the most in a year and declines in imports narrowed, adding to evidence of stabilization in the world’s second-biggest economy.
Expectations of increased U.S. interest rates have been pared back since the beginning of the year. As metal doesn’t offer a yield, higher rates tend to pull gold prices lower.
According to Dan Smith, a senior adviser at Oxford Economics, “There’s a sense of an improving risk appetite around the world, and that’s key for what will be driving gold in the coming months”.
Bullion for immediate delivery fell 1 per cent to £874.58 an ounce by 11:15 a.m. in London, according to Bloomberg generic pricing. The yen fell against most of its peers.
Philadelphia Fed President Patrick Harker and Dallas Fed chief Robert Kaplan’s remarks on Tuesday echoed Chair Janet Yellen’s call that policy makers should err on the side of caution, boosting expectations that officials won’t act when they meet on April 26-27. San Francisco Fed President John Williams said two to three rate rises in 2016 is reasonable.
“Fed officials have been giving mixed comments,” Madhavi Mehta, an analyst at Mumbai-based Kotak Commodity Services Ltd., said. “This could be an additional reason for a correction.”