Gold prices logged their biggest daily decline in nearly three weeks on Wednesday, pressured by strength in the dollar and a climb in U.S. benchmark stock indexes, as the market weighed House Speaker Nancy Pelosi’s decision to launch a formal impeachment inquiry against President Donald Trump.
Pelosi announced the impeachment inquiry into Trump late Tuesday following a chorus of criticism in the wake of reports that the U.S. president pressed Ukraine’s head of state to investigate Democratic presidential candidate Joseph Biden and his son Hunter.
Trump asked Ukrainian President Volodymyr Zelensky to “look into” former Vice President Joe Biden and his son, according to a summary of a July telephone call released by the White House on Wednesday.
Prices for gold moved up in electronic trading Wednesday after the news, which pressured U.S. benchmark stock indexes, but the haven commodity fell Wednesday as the ICE U.S. Dollar Index DXY, +0.70% traded up by 0.7% and benchmark stock indexes climbed.
Gold’s move offers “more evidence that the gold price is headline-driven right now,” said Brien Lundin, editor of Gold Newsletter. The summary of Trump’s phone call is “being interpreted as a nothingburger, so stocks are rallying and gold is selling off.”
The impeachment inquiry may “be more of a ho-hum issue for the markets than many are expecting, although undoubtedly an entertaining sideshow,” he said.
“I’m still confident that the underlying trend of ever-easier monetary policy will return to drive gold higher, but right now that’s not moving gold as the headlines continue to whip it back and forth,” Lundin told MarketWatch.
Gold for December delivery GCZ19, -1.88% on Comex dropped $27.90, or 1.8%, to settle at $1,512.30 an ounce, after it finished at its highest on Tuesday for a most-active contract since Sept. 4, according to FactSet data. Prices logged the biggest daily dollar and percentage decline since Sept. 5, according to FactSet data.
December silver SIZ19, -3.53% fell 55.5 cents, or 3%, to $18.073 an ounce, a day after posting a decline of 0.4%.
For now, gold’s pullback has come on the back of strength in the dollar, said George Gero, managing director at RBC Wealth Management. But the price retreat may be “short lived” as “wherever investors look, they see economics, politics, and geopolitical risks that curtail risk appetites.”
“Investors lack clarity [and] see uncertainty everywhere,” said Gero, in daily commentary, adding that he continues to expect gold to trade in a range of $1,500 to $1,550 for now, with an eventual rise to the $1,600 area as “political headlines heat up and global economics pull back.”
Meanwhile, Trump turned up pressure on China in a United Nations’s speech on Tuesday as Washington and Beijing seek a trade deal. The U.S. president also called on all countries to act to counter Iran’s regime, which Washington has placed sanctions on.
So far this week, political developments in the U.S., along with continuing tensions in the Middle East between Iran and Saudi Arabia, as well as persistent China-U.S. tariff conflicts and worries about slowing global economic growth, all have helped to support gold prices, commodity experts said.
“The impeachment dust over in the U.S., escalating tensions between the U.S. and China after Trump’s speech, and targeting Iran as a major culprit of the recent incidents which happened over in Saudi Arabia, all of this have all supported the recent move in the gold price.” wrote Naeem Aslam, chief market analyst at ThinkMarkets, in a Wednesday research note.
Analysts said the impeachment inquiry is a potential drag for stocks, though the potential may be limited barring an indication that support for Trump is slipping in the Republican-controlled Senate. A vote by the House to impeach would be followed by a trial in the Senate, which would decide the president’s fate but appears unlikely given that a GOP majority there.
“The upward momentum still looks fairly strong and this means that it is only a matter of time before the price breaks above the $1,550 mark,” Aslam wrote.
In other metals trading, December copper HGZ19, +0.25% edged up by 0.2% to $2.612 a pound. October platinum PLV19, -3.11% shed 2.9% to $927.90 an ounce and December palladium PAZ19, -2.11% settled at $1,611.80 an ounce, down 2.1%.