Gold Prices Plunge More Than 1% as Equities Rally; Silver Prices Also Edge Lower

Gold futures settled sharply lower on Tuesday as a rally in global equity markets amid improving macroeconomic environment reduced the demand for safe-haven bets while constant outflows from gold-backed ETFs has also weakened investors’ faith on the metal. Silver prices also slipped on Tuesday.

Moreover, lack of inflationary pressure is weighing on metal’s inflation hedge appeal.

U.S. Gold futures for June delivery plunged $19.20 an ounce or 1.3%, to settle at $1,448.80 an ounce on the Comex division of the New York Mercantile Exchange.

Spot gold was last down 1.31% to $1,449.70 an ounce.

Tuesday marked yet another day where U.S.’s major averages touched fresh highs. While the S&P 500 index entered the “bull” territory, the Dow Jones also breached 15,000 points to extend its record high level. The sentiment was boosted by unexpectedly strong German industrial orders data.

Earlier today an economic survey showed that the industrial orders in Europe’s largest economy rose 2.2% in February while economists were expecting a fall of 0.5%. The German Benchmark Index, DAX also touched all-time-high. In Asia, the Japanese benchmark index Nikkei 225 also closed at its more than five year high.

Thus far this year, the Dow Jones is up 14% while NASDAQ Composite and S&P 500 have climbed about 13%, showed data provided by CNBC. In this backdrop, investors have hardly any incentive to invest in gold which is down more than 10% year-to-date.

“As long as we continue to see stock markets making new highs investors are not in need for alternatives,” said  Saxo bank senior manager Ole Hansen in note to clients, according to Reuters.

“A break through $1,440 could set some alarms off and trigger a deeper correction towards the $1,400 area,” added Hansen.

A data provided by Reuters showed that holdings of the SPDR Gold Trust (ETF) (NYSE: GLD) fell 0.3 percent to 1,062.30 tons on Monday, a lowest level recorded since August 2009.

Silver futures were last down 0.56% to $23.82 an ounce.

In late trading, the iShares Silver Trust (ETF) (NYSE: SLV) was down 0.39%, and the ProShares Ultra Silver (ETF) (NYSE: AGQ) was down 1.07%.

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.