Metals Stocks: Gold Prices On Track For Lowest Settlement Of The Year

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Markets/commodities reporter

Gold futures dropped on Friday, on track to mark their lowest finish of the year just a day after settling at their highest in about month, as the benchmark U.S. dollar index touched an 11-month high, weighing on assets pegged to the monetary unit.

August gold GCQ8, -2.12%  dropped $21.20, or 1.6%, to $1,287.10 an ounce. Based on the most-active contract, prices settled Thursday at their highest in roughly a month. They were poised Friday to mark their lowest settlement since December.

“Despite some risk aversion in the marketplace [Friday], the gold market has instead chosen to focus on the recent strong rally in the U.S. dollar index, which today scored an 11-month high,” said Jim Wyckoff, senior analyst at Kitco.com.

The ICE U.S. Dollar Index DXY, -0.08% a measure of the dollar against a half-dozen major currencies, traded as high 95.13, a level not seen since July 2017, boosted by lingering U.S. economic optimism. Data Friday showed the Empire State manufacturing survey rose 4.9 points in June to a reading of 25, the highest since October, while the University of Michigan consumer-sentiment index in June rose to a 99.3 reading.

The dollar index has, however, eased back to 94.746, trading little changed in recent dealings. The index, heavily weighted toward euros, was up 1.3% this week.

“After the big breakdown in the EUR/USD EURUSD, +0.3458%  exchange rate yesterday, the positively-correlating gold was always going to struggle to sustain its gain,” Sid Fawad Razaqzada, technical analyst at Forex.com.

Gold’s “inability to hold above the $1,307 resistance level and the subsequent breakdown below the psychologically-important level of $1,300 has led to follow-up technical selling,” he said. “The breakdown undoubtedly triggered a cluster of stop sell orders which exacerbated the breakdown.”

The yellow metal had finished Thursday above the psychologically significant level at $1,300, a day after the European Central Bank spelled the end of its easy-money policies but did so at a more cautious pace than had been anticipated, driving the euro on Thursday to its worst one-day loss against greenback since 2016.

Adrian Ash, director of research at BullionVault, said fundamental gold demand has weakened during a seasonally fallow period for the commodity after holidays in India and other parts of Asia that tend to drive up appetite for bullion.

“Investor demand has really gone soft,” Ash told MarketWatch.

Separately, on Friday, the Bank of Japan left its monetary policy steady, but investors were focused on its comments on consumer-price inflation. The BOJ update on monetary policy comes after the comparatively more hawkish tones set by the ECB, which held its benchmark rates in check but laid out a timetable to eventually tighten policy sometime next year, while the Federal Reserve lifted rates by a quarter-point for a seventh time since December of 2015 to a range between 1.75% and 2%.

A rising rate environment tends to be bearish for gold which doesn’t offer a yield.

In other metals trading, July silver SIN8, -3.86%  gave up 2.9% to $16.765 an ounce, shrinking its weekly gain to about 0.1%.

July copper HGN8, -2.53%  shed 1.7% to $3.168 a pound, looking at a weekly loss of around 4%. July platinum PLN8, -2.48%  fell 1.7% to $895.30 an ounce, trading 1.2% lower on the week, while September palladium PAU8, -2.16%  was down 1.6% at $990.60 an ounce, poised for a weekly decline of 1.5%.

Among exchange-traded funds, the SPDR Gold Shares GLD, -1.83%  fell 1.3%, on track for a weekly fall of 1%. the iShares Silver Trust SLV, -3.37%  lost 2.2% and the VanEck Vectors Gold Miners GDX, -1.99%  shed 2%.

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