Gold settles lower; other metals slide 

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Palladium slides nearly 5%; copper still at 6-year low

Gold futures failed to score any gains on Monday, despite its reputation as a refuge in times of market turmoil, while other metals took a hit on the latest rout in global stock markets.

Investors fretted about the weakening state of China’s highflying economy, souring the demand outlook for industrial metals.

High-grade copper HGU5, -0.07% —one of China’s major imports—dropped 4.5 cents, or 1.9%, to end at $2.259 a pound, keeping the contract at the lowest level in more than six years. Palladium took the biggest percentage hit, with the September contract PAU5, -3.77%  dropping $29.40, or 4.9%, to $575.05 an ounce. October platinum PLV5, -0.61%  fell $35.60, or 3.5%, to $991.50 an ounce.

Silver for September delivery SIU5, -0.25%  shaved off 53.9 cents, or 3.5%, to $14.762 an ounce.

“Psychologically, [the selloff] is understandable given that a ‘hard landing’ of the Chinese economy would hit [base metals] hard. After all, China accounts for around half of total metal demand,” analysts at Commerzbank wrote in a note.

“From a fundamental viewpoint, however, there is little justification for the current weakness of metal prices, as the Chinese metal trading statistics for July illustrate. They show that Chinese demand for metals remained robust in July,” they said.

Monday’s selloff in metals came after China’s Shanghai Composite IndexSHCOMP, -7.63%  wiped out its year-to-date gain with an 8.5% plunge, its worst one-day percentage loss since 2007. Read: How the market carnage is deepening, in four charts

In the U.S., the Dow Jones Industrial Average DJIA, -3.57%  plunged 1,000 points at the open Monday. U.S. stocks pared those losses but remained sharply lower, adding to last week’s 1,017.65-point, or 5.8%, slide.

Despite that backdrop, gold failed to benefit from any increased appeal as a safe-haven investment. Gold for December delivery GCZ5, -0.52%  lost $6, or 0.5%, to settle at $1,153.60 an ounce.

Mark O’Byrne, executive director at GoldCore, said he had expected gold prices to settle lower Monday as the gold-futures market experienced some liquidation by hedge funds on margin calls. A margin call prompts an investor to deposit more cash to keep a position.

Over the month and quarter, gold has had an inverse correlation with equities, but “frequently, gold is correlated with equities in the very short term and can fall when stock markets suffer sharp one-day corrections,” O’Byrne said.

Meanwhile, “gold has started to emerge as a significant indicator of market moves,” said Colin Cieszynski, chief market strategist at CMC Markets. But that gold didn’t continue to rally Monday is a “sign that the limits may have been reached for now.”

Cieszynski said gold may remain active in the coming weeks and months, “particularly as we move into a historically favorable seasonal period for gold with Indian wedding season approaching.”

On Friday, gold settled at a more than six-week high to score its biggest weekly gain since January, as the slump in equities and a drop in the U.S. dollar buoyed the metal’s appeal.

Source: MarketWatch – Gold settles lower; other metals slide

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