Metals Stocks: Gold Slides To 6-month Lows As U.S. Stocks, Dollar Index Gain

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Markets/commodities reporter

News editor

Gold prices fell to their lowest levels in more than six months on Tuesday, with the precious metal under pressure from gains in the U.S. stock market and a stronger dollar.

The June selloff in global risk assets, which was sparked by a fresh round of global trade friction, continued Tuesday in most Asian markets but European stocks mostly advanced and U.S. benchmark stock indexes edged higher. Global trade friction, however, has had a subdued impact in supporting haven gold so far. That leaves the metal almost exclusively tethered to dollar moves that are tracking higher U.S. interest rates.

Read: Here’s what may be eroding gold’s traditional haven status

“Traders are finding more value in stocks than gold,” said Chintan Karnani, chief market analyst at Insignia Consultants. “They are sitting on cash and trying to find stocks which are showing signs of a bottom. As a result gold is being ignored.”

August gold GCQ8, -0.58%  fell $6.30, or 0.5%, to $1,262.60 an ounce after trading as low as $1,256.40. The settlement Monday at $1,268.90 was its lowest finish of 2018 and the contract so far is down more than 3% in June.

Read: Death cross appears in gold for first time since 2016, even as stock market slumps

A popular gold exchange-traded fund, the SPDR Gold Shares GLD, -0.58% was down 0.5%, feeding a decline of 3.1% so far in June. Gold-backed exchange-traded funds tracked by Thomson Reuters were headed for their weakest month since July 2017, as investors covered losses in stocks, commodities and other markets stoked by tariff disputes.

“Some investors are liquidating long gold positions to meet margin calls on stock markets,” Karnani said.

Meanwhile, U.S. economic fundamentals are strong, he added. On Tuesday, the U.S. consumer confidence index revealed a slid to 126.4 in June, from a revised 128.8 in May, but the data continues to show that American as still optimistic about the domestic economy.

Instead of drawing haven demand, “gold and silver are following their raw commodity counterparts lower on worries of less world trade in raw commodities if a full blown trade war breaks out between the U.S. and the other major economies of the world,” said Jim Wyckoff, senior analyst with Kitco.com. He’s eyeing a gold close below the December low of $1,251.90 as the next bearish milestone.

The ICE U.S. Dollar Index DXY, +0.39% which reflects the dollar’s strength against a half-dozen rivals, was up 0.3% at 94.54 and about 2.6% higher for 2018 to date.

Higher rates and a stronger dollar are headwinds for commodities that don’t offer a yield and a strengthening buck tends to weigh on assets priced in the currency, including gold, making them more expensive for purchasers using other monetary units.

Gold has dropped as “the dollar is continuing to be one of the biggest beneficiaries of the safe-haven shift, with U.S. 10-year Treasury yields TMUBMUSD10Y, -0.12% creeping back below 2.9%,” said Craig Erlam, senior market analyst at Oanda.

“It’s difficult to determine just what impact recent [trade] events will have on the economies of those involved, not to mention just how much worse the situation is going to get. What’s clear though is that it’s weighing heavily on risk appetite,” he said.

Peter Navarro, the president’s trade adviser, said Monday a forthcoming Treasury Department report will focus on China, and with respect to other countries, there’s “nothing on the table.” Navarro spoke on CNBC following a tweet by Treasury Secretary Steven Mnuchin, which said investment restrictions will apply to all countries attempting to steal U.S. technology, not just China.

Check out: How Trump’s European auto tariff proposal could backfire

And read: Why a major trade war could mean a ‘full-blown recession’

Meanwhile, China’s central bank issued draft guidelines on gold asset management products on Tuesday, in a bid to strengthen gold market supervision. Financial institutions are required to register with the central bank if they want to sell gold asset management products, the People’s Bank of China (PBOC) said on its website.

Elsewhere in metals trading, September silver fell 0.3% to $16.36 an ounce, poised for the lowest finish in about six weeks. A popular silver ETF, the iShares Silver Trust SLV, -0.42% fell 0.3%.

September copper HGN8, +0.17%  traded at $3.014 a pound, up nearly 0.2%. October platinum PLV8, +0.40%  added 0.4% to $874.50 an ounce, while September platinum PAU8, +2.10%  rose 0.4% to $939.50 an ounce.

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