Gold futures slipped on Monday, with the precious metal sticking to the mostly downbeat trading theme for June even as the U.S. dollar which has been strong throughout the month eased in early trading.
A fresh round of global trade friction was again driving financial market sentiment to start a new week, although the issue has had a subdued impact in supporting haven gold.
August gold fell $1.30 to $1,269.60 an ounce, trading near the lowest levels of 2018. It shaved off 0.6 percent for last week despite an uptick during Friday’s subdued session and is tracking a 2.6 percent June drop.
A popular gold exchange-traded fund, the SPDR Gold Shares was down 0.3 percent pre-market, feeding a decline of 2.4 percent so far in June.
The ICE U.S. Dollar Index which reflects the dollar’s strength against a half-dozen rivals, was down 0.1 percent at 94.40, but is up 0.5 percent so far this month and up nearly 2.6 percent for 2018 to date.
The 10-year US treasury note often used as a financial benchmark whose yield typically moves opposite of gold, has climbed since the start of June and trades lately just below 2.90 percent.
Higher rates and a stronger dollar are headwinds for commodities because they don’t offer a yield and a strengthening buck tends to weigh on assets priced in the currency, making them more expensive for purchasers using other monetary units.
The yellow metal’s current downdraft comes as gold hasn’t been treated to a typical and clear-cut haven boost amid global trade hostilities. That’s in large part because the higher interest-rate environment has fueled the dollar’s advance.
Still, the trade impact is nibbling at metals markets. “Hedge funds cut bullish commodities bets by 14 percent in the week to June 19,” noted Ole Hansen, commodities analyst at Saxo Bank. “The biggest changes were seen across metals and grains as longs were trimmed and fresh shorts added in response to the stronger dollar and trade war fears.”
The news on this front keeps coming. In a post to Twitter on Sunday, President Donald Trump called on trading partners to remove their “trade barriers and tariffs or be met with more reciprocity by the U.S.”