Gold at two-week low, finds little traction as dollar, stocks extend advance.
Gold extended recent losses with a soft start to Monday trading, nicked by a stronger dollar and continued stock market resilience, even at repeat all-time highs.
The yellow metal settled at a two-week low on Friday, suffering the biggest weekly loss in a month as the dollar strengthened following the Republican-controlled Senate’s passage of a budget blueprint that’s seen helping to clear the way for the stock market-strengthening tax cuts promised by President Trump. More work on taxes is expected this week.
Spot “gold has fallen to $1,275 per troy ounce this morning, which puts it on the 100-day moving average,” said Carsten Fristch, commodities analyst at Commerzbank, in a note. “Selling pressure is being generated by a firmer U.S. dollar that is appreciating on the back of hopes of a tax reform and the expectation of higher interest rates in the U.S.”
In the futures market, gold for December delivery slipped $3.80, or 0.3%, to $1,276.70 an ounce. It finished at $1,280.50 Friday, for its lowest close since Oct. 6, and a roughly 1.9% weekly drop. That was the worst weekly performance since Sept. 22, according to FactSet data. The SPDR Gold Trust fell 0.4% premarket after its loss of around 1.8% for last week.
Silver for December eased about 8 cents, or 0.5%, to $16.995 an ounce Monday. The contract logged a 1.9% drop last week. The iShares Silver Trust eased 0.4% premarket.
Precious metals fell as the ICE U.S. Dollar Index nosed up 0.2%. The dollar’s gain was pronounced against its Japanese rival after a landslide Sunday election victory for Japanese Prime Minister Shinzo Abe “ensures the continuation of his loose monetary and expansive fiscal policy, a recipe for a weaker currency,” said Marshall Gittler, chief strategist at ACLS Global.
Precious metals prices of late were hurt by the rising dollar amid firming expectations that interest rates will go up in December and could continue along a slow and steady tightening course next year. Higher interest rates dull the appeal of nonyielding metals, in favor of interest-bearing assets, making gold less attractive. Additionally, a stronger greenback tends to hurt dollar-denominated commodities, because they then become more expensive for holders of other currencies.