Gold fell on Friday, setting prices up for their lowest finish in more than a week as upbeat monthly U.S. employment data buoyed the dollar and suggested that the Federal Reserve remains on track to raise interest rates later this month and later this year.
Relative calm returned to Italian politics, a move also seen helping to pave the way for U.S. action on rates.
August gold GCQ8, -0.25% lost $7, or 0.5%, to $1,297.70 an ounce, with the contract trading about 0.8% lower for the week. A settlement around this level would be the lowest since May 23. The contract ended about 1.6% lower for May.
Based on the most-active futures contracts, gold was down about 1.1% last month. The metal hit a fresh 2018 low in mid-May and cracked the downside of a $1,300-to-$1,350 range that had confined gold for much of this year.
Data Friday showed that the U.S. created 223,000 new jobs in May, pushing unemployment down to an 18-year low of 3.8%.
Separately, the Institute for Supply Management’s manufacturing index rose to 58.7%, up 1.4 percentage points from April and a two-month high.
The jobs report “should support Fed officials’ plans to hike again in June — despite a pick up in uncertainty due to trade protectionism and European politics — and keep them on a gradual hiking pace,” said analysts at TD Securities, in a note Friday. “This report suggests continued gradual improvement in wage growth, rather than risks of a sharp acceleration in inflation.”
Read: Rising angst around global politics doesn’t move gold like it used to
Rising real interest rates impact the opportunity costs of holding gold because the metal provides no yield, and entices investors to rotate into riskier assets like stocks. Higher rates may also boost the value of the dollar which usually moves in the opposite direction of the gold price.
The benchmark ICE U.S. Dollar Index DXY, +0.15% tacked on 0.2% at 94.18. The index traded roughly 2.4% higher for last month, though was so far trading about flat for the week.
Thursday’s trading was volatile. After the White House announced that it will impose tariffs on steel and aluminum from Canada, Mexico and the European Union starting Friday, prices for gold moved decidedly higher, before falling back again by the settlement.
Read: Here’s what steel and aluminum tariffs on U.S. allies mean for the metals markets
Now, Canada has promised to slap its own tariffs on a wide range of U.S. goods, including steel, aluminum, food and agricultural products, effective July 1. Mexico is targeting steel and various food offerings in its own retaliation, for a total value comparable to the U.S. duties. The EU has been planning its response for some time, with tariffs expected on steel and Harley-Davidson motorcycles among other goods worth $7.5 billion, due to go into effect June 20.
Also see: U.S. tariffs only add to the obstacles for Nafta negotiations
Gold slipped as U.S. stocks echoed sharp gains in Europe, where relief that Italy now has an agreed government boosted risk-on markets. Populist parties the League and the 5 Star Movement struck a deal to form a coalition government, ending months of political deadlock and averting a summer ballot that was seen as a de facto referendum risking a euro crisis.
The yield on the benchmark 10-year U.S. Treasury note TMUBMUSD10Y, +1.05% moved 7.6 basis points higher to 2.906%, rebounding after logging a 11.2 basis points decline for the month of May. The large monthly decline in U.S. yields came after Italian political turmoil earlier this week sparked speculation the Federal Reserve would hold off on raising rates until the risks receded. Gold also tends to move inversely to Treasury yields.
In other metals trading, July silver SIN8, +0.10% was nearly flat at $16.45 an ounce, with the contract trading about 0.6% lower for the week. July copper HGN8, +0.72% traded at $3.078 a pound, up 0.4% for the day so far and looking nearly unchanged for the week. July platinum PLN8, -0.21% slipped 0.3% to $907.30 an ounce, set for a weekly gain of 0.6%, while September palladium PAU8, +0.64% added nearly 0.3% to $984.20 an ounce, poised for a rise of 0.9% on the week.
Among exchange-traded funds, the SPDR Gold Shares GLD, -0.13% lost 0.5%, trading down 0.5% for the week. The iShares Silver Trust SLV, +0.36% added 0.2% for the session so far, and the VanEck Vectors Gold Miners ETF GDX, +0.16% was down 0.1%.