Gold futures traded lower Monday, with the precious metal looking to mark another low year to date, even as the U.S. dollar, strong throughout the month, weakened against its currency rivals.
A fresh round of global trade friction was again driving financial market sentiment to start a new week, although the issue has had a subdued impact in supporting haven gold.
August gold GCQ8, -0.22% fell $2.70, or 0.2%, to $1,268 an ounce, poised to finish at its lowest level of 2018. It shaved off 0.6% for last week despite an uptick during Friday’s subdued session and was tracking a 2.8% June drop.
A popular gold exchange-traded fund, the SPDR Gold Shares GLD, -0.25% was down 0.3% premarket, feeding a decline of 2.5% so far in June.
The “near-term path of least resistance is still lower for gold, but a spike in volatility due to trade concerns could easily see futures run back towards $1,300,” said Tyler Richey, co-editor of the Sevens Report.
The ICE U.S. Dollar Index DXY, -0.15% which reflects the dollar’s strength against a half-dozen rivals, was down 0.1% at 94.41, but was up 0.5% so far this month and up 2.5% for 2018 to date.
The 10-year Treasury note TMUBMUSD10Y, -0.79% often used as a financial benchmark whose yield typically moves opposite of gold, has climbed since the start of June and trades lately just below 2.90%. As for stocks, the Dow DJIA, -1.59% marked its biggest weekly decline since March 23 through Friday and traded lower on Monday.
Higher rates and a stronger dollar are headwinds for commodities because they don’t offer a yield and a strengthening buck tends to weigh on assets priced in the currency, making them more expensive for purchasers using other monetary units. Stock weakness can prove supportive for the perceived haven status of gold, but the two assets were bucking their usual relationship.
But gold’s current downdraft comes as the precious metal hasn’t been treated to a typical, clear-cut haven boost amid global trade hostilities. That is in large part because the higher interest-rate environment has fueled the dollar’s advance.
Still, the trade impact is nibbling at metals markets.
“Hedge funds cut bullish commodities bets by 14% in the week to June 19,” noted Ole Hansen, commodities analyst at Saxo Bank. “The biggest changes were seen across metals and grains as longs were trimmed and fresh shorts added in response to the stronger dollar and trade war fears.”
The news on this front keeps coming. In a post to Twitter on Sunday, President Donald Trump called on trading partners to remove their “trade barriers and tariffs or be met with more reciprocity by the U.S.”
The United States is insisting that all countries that have placed artificial Trade Barriers and Tariffs on goods going into their country, remove those Barriers & Tariffs or be met with more than Reciprocity by the U.S.A. Trade must be fair and no longer a one way street!— Donald J. Trump (@realDonaldTrump) June 24, 2018
That tweet may be aimed at the European Union, which on Friday began implementing tariffs on $3.2 billion in U.S. imports. The U.S. president responded by threatening 20% tariffs on European cars entering his country. By the end of the week, Trump is expected to announce curbs on Chinese investment in U.S. technology firms.
Economic news was mixed, with the Chicago Fed national activity index turning negative in May for the first time since January, while May new-home sales came in at a better-than-expected seasonally adjusted annual 689,000 rate.