Gold Set for Weekly Fall as Europe Readies to Ease Lockdowns

(Bloomberg) -- Gold headed for its largest weekly decline since mid-March as European nations offered cautious signals they’ve passed through the peak of the coronavirus outbreak and as U.S. cases rose at the slowest pace this month. Base metals declined.

U.K. Prime Minister Boris Johnson said the country was through the worst of the outbreak and pledged to deliver plans to lift the lockdown, while Italy, France and Germany all also outlined proposals to gradually ease restrictions. The European Central Bank stepped up its response to the coronavirus crisis by cutting funding costs for banks, but refrained from boosting its bond-buying program.

While stimulus efforts around the world have helped calm investors’ nerves and fueled gains in equity markets, industrial metals were under pressure on Friday after fresh evidence of the toll the virus is taking on major economies. Data showed South Korean exports tumbled the most in a decade and Japanese manufacturing weakened.

“The divergence in financial and fundamental activity data is striking,” Pernille Henneberg, an economist covering global macroeconomics at Citigroup Inc., said in an a note. “More effective policy action is needed for a meaningful economic recovery that would align financials and fundamentals.”

Asian and European trading was limited Friday, with many nations on holiday.

Spot gold declined 0.6% to $1,675.70 an ounce as of 10:55 a.m. in London, after dropping 1.6% on Thursday. The metal is down 3.2% this week. In other precious metals, platinum fell as much as 2.5%, while silver and palladium also retreated.

Industrial Metals

Copper dropped 1.7% and nickel slipped 2.5%, extending declines in the wake of data showing deepening job losses in the U.S. Overseas shipments from South Korea fell 24% in April from a year earlier, led by declines in exports of ship, cars and auto parts, semiconductors and oil products.

Metals fell as a “raft of Asian data pointed to troubles ahead,” including the export figures, and falling industrial production in Japan, Marex Spectron’s Anna Stablum said in an emailed note.

Metals could also be pressured after U.S. President Donald Trump revived his attack on China, speculating it could have spread the coronavirus and threatening trade tariffs.

Iron ore futures in Singapore rose as much as 0.7% to $81 a ton. Demand for the steelmaking ingredient remains firm in China, according to producer Fortescue Metals Group Ltd.

“We are seeing economic activity resume and pick up, we are seeing steel inventories start to decrease and we are seeing very strong demand for iron ore,” Fortescue Chief Executive Officer Elizabeth Gaines said Thursday in a Bloomberg TV interview.

©2020 Bloomberg L.P.