Gold futures made modest moves Tuesday, seesawing between losses and gains but at risk of finishing below $1,300 an ounce for a third straight day, as a stronger dollar cut into investment interest in the precious metal.
A wait-and-see mood had a grip on a quiet market, with investors awaiting the latest on trade and geopolitical developments.
“Concerns over the path of protectionist policies that the U.S. is taking could resurface as the [Group of Seven] prepares to meet in Canada this week, whilst there remains a lack of progress in discussions between U.S. and China over trade relations,” said Richard Perry, analyst at Hantec. “This is leading to a degree of consolidation across forex and commodities markets.”
August gold GCQ8, +0.26% tacked on $1.80, or 0.2%, at $1,299.30 an ounce, trading between a high of $1,299.70 and low of $1,293.50. Its settlement Monday at $1,297.30 marked the lowest since May 23.
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U.S. stocks were mixed after the technology-studded Nasdaq Composite on Monday closed at a record for the first time in nearly three months and investors around the globe generally took on the riskier asset markets.
The benchmark ICE U.S. Dollar Index DXY, +0.12% rose 0.3% to 94.285, while the yield on the benchmark 10-year Treasury note TMUBMUSD10Y, -0.96% slipped 1.6 basis point to 2.920%, a mildly supportive factor for gold.
In a note Tuesday, Edward Meir, an independent commodity consultant at INTL FCStone, said gold is likely to move higher from the current levels, “as we don’t think the dollar rally will resume as aggressively going into June.”
“We say this in view of the fact that for all practical purposes, the June [U.S. Federal Reserve interest] rate hike is pretty much discounted and we suspect the dollar could sell off slightly once the Fed’s move is out of the way,” he said. The Fed policy statement is due June 13.
Data last week showed that the U.S. created 223,000 new jobs in May, pushing unemployment down to an 18-year low of 3.8%. That news reinforced expectations the Fed will raise interest rates at least two more times in 2018 following its March rate increase, possibly as soon as this month, while also boosting the odds of a third additional rate rise back to around 40%, according to Fed funds futures.
Rising real interest rates impact the opportunity costs of holding gold because the metal provides no yield, and entices investors to rotate into riskier assets like stocks. Higher rates may also boost the value of the dollar, which usually moves in the opposite direction of the gold price.
On the economic front Tuesday, the Institute for Supply Management said its survey of businesses, excluding manufacturing, rose to 58.6 last month from 58.8 in April. The Markit services purchasing managers index rose to 56.8 in May from 55.7.
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For now, investors appeared to be putting trade tensions aside, even after trade talks broke down between the U.S. and China over the weekend. But leaders of the Group of Seven nations will hold talks in Canada on Friday and Saturday, where tariffs and trade are likely to be discussed. This weekend’s rebuke by G-7 finance ministers of the Trump administration’s trade tariffs could add some stress to the gathering.
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In other metals trading, July silver SIN8, +0.36% added 0.1% at $16.485 an ounce. July copper HGN8, +1.69% traded at $3.182 a pound, up 1.5%. July platinum PLN8, -0.71% fell 0.9% to $895.40 an ounce, while September palladium PAU8, -0.98% shed 1.7% to $977.90 an ounce.
Among exchange-traded funds, the SPDR Gold Shares GLD, +0.33% rose 0.1%. The iShares Silver Trust SLV, +0.39% and the VanEck Vectors Gold Miners ETF GDX, +0.61% were both up 0.2%.