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Gold notches a gain after back-to-back session declines

MarketWatch logo MarketWatch 4 days ago Myra P. Saefong
METALS STOCKS

a close up of a device© Provided by Dow Jones & Company, Inc.   Gold prices ended higher Thursday, finding some support a day after a fresh round of global trade-war worries buoyed the dollar and sent the yellow metal to a more than one-week low.

August gold (GCQ8) tacked on $2.20, or 0.2%, to settle at $1,246.60 an ounce. It lost 0.9% on Wednesday, marking its lowest settlement since July 2 for a most-active contract. A popular fund tracking gold, the SPDR Gold Shares (GLD) meanwhile, was on track to fall by nearly 0.8% so far this week, with gold futures set for a similar weekly slump. 

In recent weeks, the dollar has been the most significant influence for bullion, market participants say. The ICE U.S. Dollar Index (DXY) a measure of the buck against a half-dozen monetary units, climbed by less than 0.1% Wednesday, though it was on pace for a weekly rise of around 0.8%.

A stronger dollar can make assets linked to the currency relatively more expensive to buyers using other monetary units.

Still, the dollar index traded off the session’s highs in the wake of Thursday’s U.S. economic data. Consumer prices rose in June at the highest yearly rate since 2012, while weekly jobless claims fell by 18,000 to 214,000, moving toward the lowest levels in almost 50 years.

“The U.S. economic data brought weakness in the dollar index and this has helped the gold price,” said Naeem Aslam, chief market analyst at Think Markets. “Moreover, we do believe that trade tension (to some extent) is also providing some momentum for gold.”

An escalation of tensions between the U.S. and its trading partners across the globe was widely viewed as jolting higher the buck, which has been seen as least vulnerable to the negative impact of tariff disputes. President Donald Trump has proposed 10% tariffs on $200 billion in Chinese imports, coming a week after the global superpowers placed equal tariffs of 25% on some $34 billion one another’s imports. The move is seen as deepening the rift with Beijing and sending a message to other trading partners that the U.S. won’t back down in a trade fight.

Fears of a spillover effect from intensifying trade disputes are seen as more severely hurting industrial metals, which tend to slide amid angst that a tit-for-tat spat over import duties that could hurt global economies.

September copper (HGU8) climbed by 1.2% to $2.777 a pound after plunging by 3.4% Wednesday to mark the lowest finish since late July 2017. The metal, colloquially known as Dr. Copper, due to its importance in technology and constructing buildings, was set for a weekly decline of about 1.6%.

Meanwhile, September silver (SIU8) which dually serves as a precious and industrial metal, rose 16 cents, or 1%, to $15.977, a day after marking its lowest most-active contract finish year to date.

October platinum (PLV8) added 1.4% to $846.40 an ounce and September palladium (PAU8) settled at $948.80 an ounce, up 1.3%.

Looking ahead, Ken Ford, president of Warwick Valley Financial Advisors, said that from a “contrarian perspective, the stage is set for a big move in the coming months” for gold.

The Commitment of Traders report from the CFTC shows that gold producers have “substantially reduced their short exposure over the past few weeks, and gold traders “have the least net long positioning in almost two years,” he said.

“Seasonality” is also about to turn positive for gold, said Ford. Gold “normally finds a bottom in July and gold’s strongest months of the year are August, September [and] November.”

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