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Gold prices marked a third straight session decline on Thursday to carve out another low for 2018 as a leading dollar index—lifted in a rising interest-rate environment—tapped its highest level since last summer.
August gold lost $4, or 0.3%, to settle at $1,270.50 an ounce. Prices finished at their lowest for a most-active contract since Dec. 20, according to FactSet data.
Among exchange-traded funds, the SPDR Gold Trust was nearly flat, while iShares Silver Trust added 0.2%. The VanEck Vectors Gold Miners rose 0.3%. Holdings of SPDR Gold Trust, the largest gold-backed ETF, have fallen nearly 5% to 26.645 million ounces since late April.
“The precious metal is firmly in a downtrend and this is mainly due to the strength in the dollar index, which is trading at a significant level,” said Naeem Aslam, chief market analyst with Think Markets.
The ICE U.S. Dollar Index a measure of the buck against a half-dozen currencies, touched a high of 95.529 Thursday, a level it hasn’t traded at since July 2017. It has eased back by 0.3% to 94.80, but still trades about 0.9% higher in June so far, according to FactSet data.
Gold has been repeatedly attacked by a broadly stronger dollar for the most part of this trading week. A strengthening dollar weighs on commodities priced in the currency, because it makes those assets more expensive for buyers using other currencies.
Gold was weak even as U.S. stocks declined Thursday, putting the Dow Jones Industrial Average at risk of an eighth down session in a row. The two markets often diverge.
Gains in the greenback have offset demand for gold bullion amid escalating trade tensions that would normally lure bidders to the haven asset.
For now, markets remain fixated on tensions between the U.S. and key trading partners such as China and the European Union, contemplating whether trade’s impact could hold back an aging U.S. economic expansion at the same time that the Federal Reserve is removing monetary policy accommodation.
“One would have expected heightened trade concerns to elevate the yellow metal, but prices simply remained at depressed levels,” said Lukman Otunuga, research analyst at FXTM.
“Hawkish comments from Fed Chair Jerome Powell at the ECB Forum simply worsened matters for zero-yielding gold, with prices tumbling to fresh six-month lows,” he said in a note. “While uncertainty over global trade tensions may offer some support further down the road, investors seem more concerned with an appreciating dollar and Fed hike expectations.”
The Fed’s plan to raise interest rates twice more in 2018, after lifting benchmark rates by a quarter of a percentage point last week, have helped to underpin some upward momentum in the U.S. dollar and had driven interest rates on benchmark 10-year Treasury note higher. Comments from major central bank leaders this week have emphasized how hawkish the Fed is compared with the European Central Bank and the Bank of Japan.
Upbeat economic data could enforce the Fed’s plans. A report on U.S. weekly jobless claims Thursday showed a decline of 3,000 to 218,000, but the Philadelphia Fed’s manufacturing index slowed sharply to a reading of 19.9 in June from 34.4 in May.
Around the metals complex, July silver rose 0.1% to $16.326 an ounce. Its Wednesday settlement at $16.309 was the lowest settlement since mid-May. July copper settled at $3.022 a pound, down 0.6%.
July platinum retreated nearly 1.3% to $863.20 an ounce, while September palladium lost 1.2% to $945.60 an ounce.