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Greed is back, and gold prices slack; investors shift away from the metal

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(Kitco News) - As equities push higher on the back of more liquidity added by the Federal Reserve and what appears to be a de-escalation of the trade wars, safe haven assets like gold have seen withdrawn interest from investors.

Gold is trading down 0.37% on the day, with December Comex gold last trading at $1,467.90 an ounce. On the month, spot gold has fallen 3% from early November highs.

Jim Wyckoff, senior analyst for Kitco News, said that the general sentiment in the markets is more risk-on right now.

“The safe-haven gold and silver markets are seeing buying interest squelched by generally upbeat trader and investor risk appetite the past several weeks. This is evidenced by the rally in the U.S. stock market that has seen the major indexes this week hit record highs,” he said.

The S&P 500 last traded at 3,114.64, up more than half a percent on the day, and up 3.8% over the last 30 days.

Wyckoff added that what is needed for gold to rally upwards would be a major geopolitical shock.

“It’s going to take a significant geopolitical jolt that would rattle world markets, in order to jumpstart serious rallies in gold and silver markets. Until that occurs, look for more sideways and choppy trading,” he said.

Additionally, the new all-time highs have made it hard for investors to switch off their “greed” mode, according to TD head of commodity strategy, Bart Melek.

The CNN Fear & Greed Index, which measures investors’ sentiment based on seven technical indicators, is now at “extreme greed” territory.

“For investors, the impetus to buy gold as opposed to stocks is increasingly hard to justify. US equities printing new all-time highs is making loss-aversion a tough sell, but as yields have also begun to creep lower — holding onto the downtrend formed by end of the hiking cycle — precious metals prices have remained resilient, despite being at a risky juncture for the bulls with the Fed now on pause,” Melek said.

Melek’s comments come as the New York Fed injected $104.293 billion in temporary liquidity Thursday in the form of repurchase agreements.

According to Christopher Vecchio, senior currency strategist at IG Group, gold price volatility has also declined.

“Gold volatility (as measured by the Cboe’s gold volatility ETF, GVZ, which tracks the 1-month implied volatility of gold as derived from the GLD option chain) has fallen to its lowest level since mid-June, currently trading at 11.42,” he said.

Vecchio added that gold’s outlook has not improved in November, since Federal Reserve interest rate cut expectations have remained “depressed,” even as other G10 central banks have started to see markets price-in more monetary easing.

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