• Gold prices booked their lowest settlement in nearly eight weeks after suffering from their first monthly decline since March, as the U.S. dollar spent much of the session rebounding from last week’s sharp loss and gains in U.S. equities dulled investment demand for the precious metal.
• August gold on Comex GCQ7, +0.39% fell $23.10, or 1.9%, to settle at $1,219.20 an ounce. The settlement was the lowest since May 10, according to FactSet data tracking the most-active contracts.
Prices ended Friday at $1,242.30, leaving it down about 1.1% for the week and 2.6% for the month.
Still, for the first six months of the year, gold was up nearly 8%, according to FactSet data tracking the most-active contracts.
• September silver SIU7, +0.48% joined in gold’s retreat Monday. It tumbled 53.5 cents, or 3.2%, to $16.092 an ounce—the lowest finish since the second week of May.
• The dollar, as measured by the ICE U.S. Dollar Index DXY, -0.10% spent much of Monday’s session trading higher against major rivals, but was nearly flat when gold futures settled.
Year to date, however, the index was down almost 6%. Commodities priced in dollars often trade inversely with the dollar, as moves in the U.S. unit can influence the attractiveness of those commodities to holders of other currencies.
• U.S. stocks, meanwhile, traded mostly higher, extending gains after a report on domestic manufacturing showed a rise in June to its highest level since 2014.
• “The rally in the equity market is very much keeping investors away from gold,” Naeem Aslam, chief market analyst at ThinkMarkets UK, told MarketWatch. “However, going in the third quarter, equities usually underperform and gold shines, so any pullback could be an opportunity here.”
• In exchange-traded funds, the gold-focused SPDR Gold Shares GLD, -1.64% fell 1.6%, while the VanEck Vectors Gold Miners ETF GDX, -2.72% fell 2.7%. The iShares Silver SLV, -2.61% lost 2.6%.
• From here, “gold currently looks vulnerable,” UBS Group AG analyst Joni Teves said in a note. “Higher yields and market participants digesting a hawkish shift in tone among key central banks of late, while equities stay resilient around all-time highs,” are negative factors for the metal.
• Last week’s sharp, nearly global-wide selling in government bonds, fueled by concerns that global central bankers may be inclined to end a protracted period of accommodative policies, rattled markets. The Federal Reserve already ended its economy-juicing bond-purchase program in 2014 and has lifted benchmark interest rates, albeit slowly, four times since 2015. But it had largely acted alone.
Now, fears that central banks in Europe and the U.S., some of the largest buyers of government bonds, may be shifting from a dovish to a more hawkish posture, has sent investors out of bonds and delivered a sudden jolt higher to yields, which move inversely to prices. Higher yields tend to increase the appeal of yield-bearing assets over those, including precious metals, that don’t pay a yield.
The Fed targets a 2% annual inflation rate, but inflation recently has been stubbornly low, since pushing above the Fed’s threshold in February for the first time in nearly five years. Gold’s price tends to benefit from rising inflation because it is often viewed as a hedge against climbing prices.
Reference: Market Watch
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