Gold futures fell Thursday to their lowest levels in more than two weeks as strength in the dollar and a recent climb in major U.S. equities indexes to all-time highs sapped investor appetite for so-called haven investments.
Gold has reversed an early-week climb to trade roughly 1.5% below last Friday’s settlement. The record climb for U.S. stocks has a key influence, with the Dow Jones Industrial Average DJIA, +0.19% crossing the key 20,000 level Wednesday for the first time ever and scoring more gains Thursday.
“Gold has been trading as one of the several moving parts in the ‘Trump-Trade’ since the election,” Tyler Richey, co-editor of The 7:00’s Report, told MarketWatch. “The broader trends have been a decline in bonds, rally in the dollar, and new highs in stocks; all of which are bearish influences for gold.”
Gold for February delivery GCG7, -0.99% fell $10.70, or 0.9%, to $1,187.10 an ounce. A settlement at this level would mark the lowest since Jan. 10, according to FactSet data. Gold has faded after ending Monday at $1,215.60—its highest settlement since Nov. 17. March silver SIH7, -1.50% fell 24.5 cents, or 1.4%, at $16.735 an ounce.
“The outlook for gold is bearish based on a likely continuation of the ‘Trump-trade’,” said Richey.
“However, inflation remains the fundamental catalyst to watch in looking for a reason for gold to bottom,” he said. “If inflation begins to show signs of accelerating faster than expected, and more importantly faster than the rise in interest rates, then gold would begin to become attractive again as ‘real interest rates’ would be poised to begin moving lower.”
The ICE U.S. Dollar Index DXY, +0.72% rose 0.6% Thursday at 100.67, after briefly trimming its gain in the wake of Thursday’s jobless figures and trade data. The number of Americans who applied for unemployment benefits climbed by 22,000 to a one-month high of 259,000 in late January, but the level of layoffs remained extremely low.
The dollar’s climb Thursday “is more technical than anything” else, with a “potential bottoming process in place for the dollar index,” said Bill Baruch, chief market strategist at iiTRADER. But it can also be attributed to “a lack of bearish dollar talk from [President Donald] Trump as well as a consolidation off rejecting the lows ahead of next week’s FOMC meeting” as well as U.S. GDP data Friday, he said.