Gold prices finished in negative territory Monday as the dollar strengthened and as investors favored assets perceived as risky over so-called havens.
Gold has been plagued by a downbeat tone in the wake of recent signals from the Federal Reserve for at least one more increase to interest rates this year in what has been interpreted as an upbeat outlook on the world’s No. 1 economy. That view sent the yellow metal down for a second straight week last week because higher rates make gold and other commodities, which don’t bear yields, less appealing.
August gold GCQ7, -0.78% fell $9.80, or 0.8%, to $1,246.70. The metal suffered a 1.2% weekly decline last week.
The closely watched dollar index DXY, +0.43% rose by 0.3% on Monday, providing a headwind for commodities priced in the currency. A stronger dollar tends to make assets pegged to the buck more expensive to buyers using other monetary units.
Gold’s price early retreat on Monday, however, come as global equities, like the Dow Jones Industrial Average DJIA, +0.54% and the S&P 500 index SPX, +0.66% often perceived as risk assets, were being bid higher, pushing them to fresh all-time highs and drawing demand away from havens like gold.
“Speculative financial investors have also retreated from gold again of late, slashing their net long positions by 11% to 147,500 contracts in the week to June 13,” noted Carsten Fritsch, Commerzbank commodities analyst, in a note.
Economic uncertainty could continue to hold sway over metals and currency trading, although few major economic data releases are due at the week’s start.
Last week, Fed Chairwoman Janet Yellen laid out a plan to shrink the central bank’s massive $4.5 trillion balance sheet, one of its economy-spurring tools, starting this year, as they also raised interest rates.On Monday, New York Fed President William Dudley, a voting member of the Fed’s policy-setting committee, said he viewed the U.S. economic outlook as “pretty good,” a comment that was read by investors as offering support to the Fed’s recent monetary-policy normalization initiative.
Analysts have said Wednesday’s rate increase was fully expected, but the central bank’s more hawkish tone toward forward-looking policy was somewhat surprising.
Economic data have been spotty, but the Fed seems convinced that weakness is temporary.
“Friday’s release of a weaker-than-expected University of Michigan Sentiment survey [measuring consumer sentiment] and housing made the market trade as if the Fed had undergone a policy mistake by sounding out its hawkishness. Here we think the market has been wrong,” said Hans Redeker, currency strategist at Morgan Stanley, and his research team, in a note.
“The [Morgan Stanley] indicator of real activity (ARIA) predicts the U.S. economy keeping its current growth momentum and translates into strong GDP trackers for 2Q with the Morgan Stanley number at 2.8% and Atlanta Fed at 2.9%,” they said. “The Fed seems to be using similar thinking to our own, meaning the busy lineup of Fed speakers this week should see U.S. real rates staying supported.”
Meanwhile, July silver SIN7, -1.06% fell 15.9 cents, or 1%, to $16.502 an ounce, marking its third straight decline.
July copper HGN7, +0.98% rose 2.55 cents, or 1%, to close at $2.5895 a pound, after it ended about 3.2% lower for the week. July platinum PLN7, -0.27% was little changed, down 10 cents, or less than 0.1 %, to settle at $926.90 an ounce, after a weekly loss of about 1.4%, while September palladium PAU7, -1.09% shed $10.05, or 1.2%, to end at $855.60 an ounce.
Among the exchange-traded funds, the SPDR Gold Trust GLD, -0.78% was down 0.7%. The iShares Silver Trust SLV, -1.12% declined by 0.9%, while the VancEck Vectors Gold Miners ETF GDX, -0.27% gave up 0.1%.