Gold futures drop, head for over 2% weekly loss

May 18, 2018

New York (May 18)  Gold futures dropped again Friday, deepening their weekly loss to about 2.6%, as a leading dollar index and benchmark Treasury yields sustained their march higher.

June gold GCM8, -0.21% fell by $3.20, or 0.2%, to $1,286.30 an ounce. The contract’s settlement on Thursday at $1,289.40 marked a nadir for a most-active contract since late December, according to FactSet data. This week’s performance will be the second weekly decline in a row, after a month of uninterrupted weekly gains.

Gold “has marked its lowest level for the year and the possibilities are we may stay below $1,300 for some time unless there is a major risk event,” said Naeem Aslam, analyst with Think Markets.

The yield on the 10-year Treasury TMUBMUSD10Y, -0.41% note hovering at a near 7-year peak above 3.1%. The yield on the 30-year TMUBMUSD30Y, -0.17%  U.S. Treasury bond has hit the highest level since June 2015.

The U.S. dollar, as measured by the ICE U.S. Dollar Index DXY, +0.11% was up 0.1% at 93.59, trading at its highest levels of 2018, according to FactSet data.

Higher yields dent demand for nonyielding bullion and a strengthening greenback makes commodities priced in the currency, like gold, more expensive to buyers using other monetary units.

“The strength of the dollar index and the subdued reaction to the geopolitical tensions by investors are the reasons behind the move,” Aslam said. “Failure of the U.S. to reach any trade deal with China, as [President] Trump has already indicated that there may not be a favorable outcome, could stimulate some demand for gold. Investors would seek safe haven due to a full blown trade war.”

As for the latest on the trade front, a China official on Friday denied an offer had been made to cut its trade surplus with the U.S. by $200 billion. A variety of news outlets reported that an offer had been made on Thursday. That comes amid doubts over the success of those talks, given that U.S. President Donald Trump said Thursday that Beijing had become too “spoiled” and he had lowered his expectations for negotiations.

Among other metals, July silver SIN8, -0.34% fell 8 cents, or 0.5%, to $16.40 an ounce. It is headed toward a roughly 2.1% weekly decline. Copper for July delivery HGN8, -0.81% fell 0.8% to $3.0655 a pound. July platinum PLN8, -0.84% fell 0.7% to $885.70 an ounce, while June palladium PAM8, -0.37% fell 0.4% to $973.20 an ounce.

In exchange-traded action, the SPDR Gold Shares GLD, +0.06%  fell 0.3%, while the iShares Silver Trust SLV, +0.39% eased 0.3%. The VanEck Vectors Gold Miners GDX, -0.45% eased 0.4%.


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