Gold futures moved lower Monday as the dollar traded at its highest level in over five months and financial markets increasingly wondered if surging oil prices could force the Federal Reserve to be more aggressive with interest-rate hikes.
June gold GCM8, -0.02% fell $3.70, or nearly 0.3%, to $1,311 an ounce. Prices last week grazed a roughly two-month low when they came within a few bucks of a retest of the closely watched $1,300 line. The contract then ended around 0.7% lower for the week as gold tallied a third straight weekly loss.
The ICE U.S. Dollar Index DXY, +0.18% gained 0.2% to 92.739 early Monday, reaching its highest level since late December. The benchmark last week rose 0.2%, logging a fourth straight weekly advance.
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Investors may continue to push riskier markets higher, driving down gold, after Friday’s mixed April jobs report somewhat cooled expectations for a steeper climb in official interest rates. The only data of note for Monday are consumer credit for March, due at 3 p.m. Eastern Time, in a week that includes closely watched consumer prices and any signs within it for the inflation picture.
The dollar has gained and gold declined amid evidence in speeches from select Fed officials that they’re open-minded to more aggressive interest rate action even if the official line at the central bank is for a slow approach to reversing easy monetary policy, said Naeem Aslam, chief market analyst at Think Markets. Financial markets generally believe the Fed could raise rates as soon as next month and a drop in the unemployment rate, even if April payrolls lagged expectations, further fueled that argument, he said.
“These factors are keeping the dollar rally going, which is pushing the gold price lower. Hedge funds and money managers have trimmed their long position and if this trend continues, it is likely that we may see the gold price breaking [below] the $1,300 mark,” Aslam said.
“Having said all this, we have started a very important week and some major news are due this week and they have potential to support the gold price. Trump’s decision on Iran, a U.S. and China trade deal are just a few of them,” he added.
A trio of Fed members are slated to speak on Monday, which could give further clues to the direction of interest rates. Richmond Federal President Tom Barkin is scheduled to speak at George Mason University in Fairfax, Va., at 2 p.m. Eastern Time. Chicago Federal Reserve Bank President Charles Evans and Dallas Fed President Robert Kaplan will both speak at the 23rd Annual Financial Markets Conference in Amelia Island, Fla., at 3:30 p.m. Eastern.
See: MarketWatch’s economic calendar
And broader market relationships remained in focus. For one, oil prices climbed above $70 a barrel on Monday as investors kept a close eye on comments linked to the Iran nuclear deal — U.S. President Donald Trump must decide by next weekend, May 12, whether to abandon the deal. Such a move would trigger a reimposition of economic sanctions on Iran, hampering oil exports from the country and cut global supply. Higher oil prices could help spur inflation.
Global trade headlines will also be in focus for investors after a team of U.S. negotiators appeared to garner no deal out of talks with counterparts in Beijing. China state media indicated that talks were positive, and more talks will be needed to avoid a trade war, the South China Morning Post reported.
In other metals trading, July silver SIN8, -0.08% fell 0.4% to $16.440 an ounce. It saw a roughly 0.1% weekly rise through Friday.
July copper HGN8, +0.29% traded at $3.083 a pound, down about 0.1% for the session,after ending last week 0.5% higher. July platinum PLN8, +0.45% rose 0.2% to $912.40 an ounce and June palladium PAM8, +1.44% rose 1.6% to $972.40 an ounce.
In ETF action, the SPDR Gold Shares GLD, -0.03% traded 0.2% lower after notching a weekly decline of 10.8% last week. The iShares Silver Trust SLV, -0.10% fell 0.5%, while the VanEck Vectors Gold Miners GDX, +0.33% eased 0.4%.