Gold drops, adds to weekly loss as dollar index gains

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Gold headed for back-to-back losses Wednesday as the leading dollar index gained, weighing on the commodity as markets digested the latest developments over global trade and strained diplomacy at a NATO summit in Brussels.

August gold












GCQ8, -0.42%










lost $5.40, or 0.4%, to $1,250 an ounce, so far tracking about a 0.5% week-to-date loss and off more than 4% over the past month. The most popular fund tracking gold, the SPDR Gold Shares












GLD, -0.18%










was 0.4% lower.

September silver












SIU8, -0.85%










traded 15 cents, or 0.9%, lower at $15.935 an ounce, down some 0.8% so far this week and plunging 6% over the past month. The iShares Silver Trust












SLV, -0.33%










was also lower.

The ICE U.S. Dollar Index












DXY, +0.11%










which reflects the greenback’s performance against a half-dozen currencies, rose 0.3% to 94.40.

Gold has mostly been in a downtrend that has caused investors and technical analysts to maintain a bearish outlook for the asset that should ordinarily prosper during times of uncertainty, including around the trade disputes between the U.S. and its partners across the globe. However, the haven asset has shed some of its usual flight-to-safety luster so far.

The White House late Tuesday said it would assess 10% tariffs on a further $200 billion in Chinese goods. The move is seen as deepening the rift with Beijing and sending a message to other trading partners that the U.S. won’t back down in a trade fight. The news sent stocks and most “risk-on” markets lower.

Meanwhile, President Trump on Wednesday reiterated his call for allies to increase their military spending at the outset of this week’s North Atlantic Treaty Organization summit in Brussels, while sharply criticizing Germany for supporting a major gas deal with Russia, developments that only intensify the geopolitical uncertainty facing markets that have been otherwise cheered by the prospect of upbeat earnings and evidence of economic growth.

“Gold’s negative correlation to the dollar remains a key challenge in the short term, but given the short-to-medium-term dollar-negative outlook highlighted [in the Saxo Bank quarterly outlook], we believe this headwind will fade over the coming quarter,” said Ole Hansen, Saxo’s head of commodity strategy.

“Having picked major fights on trade with friends and foes it is our belief that President Trump will sooner or later go on the attack against the stronger dollar as greenback strength complicates his vision of reducing the U.S. trade deficit,” Hansen said. “Despite the fading focus on inflation, which was a key driver at the beginning of the year, we believe that investors will continue to seek diversification and protection against potentially mispriced financial and geopolitical risks” with investments in gold. He pegs the end-of-year call for gold at $1,325 an ounce, with silver at $17 an ounce.

The interest-rate watch helping drive the dollar and commodities will continue with the release of the producer-price index for June at 8:30 a.m. Eastern Time, followed by data on wholesale inventories from May at 10 a.m.

Around the metals complex, copper prices continued their retreat, more directly hit by worries over the risk of an escalating trade war. Three-month copper on the London Metal Exchange dropped as much as 4 percent to $6,081 a metric ton, its lowest since July last year, before recovering. September copper












HGU8, -2.87%










 plunged 2.7% to $2.7635 a pound.

October platinum












PLV8, -0.61%










 fell by 0.4% to $842.80 an ounce and September palladium












PAU8, -0.93%










 declined by 0.8% to $930.50 an ounce.

Read: How platinum is starting to shine for bargain hunters



Source : MTV