As dollar picks up again, gold slides towards one-year low

London — Gold prices slipped towards a one-year low on Monday as the dollar strengthened again, making bullion more expensive for buyers using other currencies.

Gold has tumbled 10% since mid-April, driven lower by a surge in the US currency. Bullion was given respite last week when US President Donald Trump branded the dollar’s strength bad for the US economy, knocking the currency down from one-year highs.

But the breather proved short-lived, with the greenback climbing again against the currencies of key gold-consuming markets China, India and the eurozone.

“For gold to rise in a big way, we really need to see the dollar start to show some weakness,” Saxo Bank analyst Ole Hansen said.

Spot gold was down 0.1% at $1,230.24/oz at 11.04am GMT, moving closer to last Thursday’s low of $1,211.08. US gold futures for August delivery were also down 0.1% at $1,230.20/oz.

A war of words between Trump and Iranian President Hassan Rouhani helped to lift prices only briefly. Geopolitical instability often boosts gold, traditionally seen as a safe place to invest in times of uncertainty. Despite a slight rise late last week, gold holdings at exchange-traded funds tracked by Reuters have fallen 5.3%, or 2.4-million ounces, since mid-May as investors choose other asset classes.

“[Gold] still trades in ‘currency mode’ rather than ‘commodity mode’ as investment demand remains too soft to push prices higher,” Julius Baer analyst Carsten Menke said.

One potential positive is a swing in speculative positioning that has seen the net short on the Comex exchange grow to the largest since January 2016. The unwinding of that 2016 short position between January and July that year helped drive gold up more than $300 to a two-year high.

“Such extreme positioning has frequently been an indicator of a pronounced countermovement in the near future,” Commerzbank analysts wrote.

Gold is also cushioned by technical support around $1,200/oz-$1,220/oz, including its July 2017 low of $1,204.90/oza, the 50% Fibonacci retracement of the 2016 rally and the psychologically significant level of $1,200/oz.

Silver was up 0.1% at $15.49/oz, though it remains near its lowest since July 2017.

Palladium was down 0.3% at $891.05/oz, near one-year lows, while platinum was 0.4% higher at $830.16/oz after touching its lowest since 2008 last week.

Reuters