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Gold Slips, Briefly Snapping $1,500 Support, on Risk Play

Investing.com - The appetite for risk is ramping up and, conversely, the preference for safe havens is plummeting.

Gold prices dropped to a two-week low on Monday as bullion briefly snapped below the key $1,500 support level after rising U.S. bond yields pushed investors toward stocks, oil and other risk assets.

Spot gold, reflective of trades in bullion, traded at $1,504.08 per ounce by 2:10 PM ET (18:00 GMT) and was down $2.92, or 0.2%, on the day. The session low was $1,497.73, marking bullion’s first foray under the $1,500 floor since Aug. 23.

Gold futures for December delivery settled down $4.40, or 0.3% at $1,511.10 per ounce on the Comex division of the New York Mercantile Exchange. In last Wednesday’s session, December gold hit a more than six-year high of $1,566.15. December gold settled down 2.2% on Thursday, its biggest one-day drop since January.

The pullback by safe-haven assets was visible in the bond markets, where the 30-year U.S. Treasury yield rose to 2.12%, its highest since Aug. 23. While shorter-dated yields also rose, the shape of the yield curve stayed much the same, sending no fresh signals about the likelihood or otherwise of a recession.

There was also fresh evidence from China that the flood of central bank buying that drove gold's rally in the first half of the year may be drying up.

China’s central bank raised its gold holdings to 62.45 million ounces in August from 62.26 million ounces a month earlier, according to data on its website at the weekend. However, that represented purchases of only 5.91 tons in the month, after an average of 11.75 tons a month since December.

For this week, investors in gold and across markets will be looking out for the European Central Bank’s monthly meeting on Thursday, where a rate reduction has been widely forecast as part of a broader package to stimulate the Eurozone economy.

The Guardian newspaper in Britain noted that Eurozone rates have been held near zero in recent years in an attempt to stimulate growth, and ECB chief Mario Draghi is expected to keep them low for longer to counter a weak manufacturing sector, uncertainty surrounding Brexit and the ongoing global trade war.

If the ECB does implement a rate cut, it would be a strong motivator for the Federal Reserve to follow through with a 25 basis points decrease when it meets Sept. 17-18. That would be the second time since July that the Fed has cut rates by 25 bp.

Lower rates are positive for gold prices.

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