Gold prices early Thursday extended a downdraft that has pushed the metal toward its lowest close in more than a year, in an atmosphere of rising benchmark rates for U.S. government debt and the continuation of a U.S. dollar rally.
August gold GCQ8, -0.99% traded $12, or 1%, lower at $1,215.90 an ounce early Thursday, a day after the precious commodity edged up slightly to register its first gain in four sessions and avoided its first finish in correction territory, defined as a decline from a recent peak of at least 10%, since late 2016, according to WSJ Market Data Group. Still, the current decline for the yellow metal puts it on track to post its lowest settlement since July of 2017.
A popular fund used to bet on gold’s moves, the SPDR Gold Shares GLD, +0.03% closed Wednesday trade with a weekly loss of 1.1%, while the underlying commodity is on track for a weekly drop of about 2.1%.
The slump for gold has mounted as the Dow Jones Industrial Average DJIA, +0.32% and the S&P 500 index SPX, +0.22% have mostly been in a recent uptrend in recent weeks, with the Dow marking its fifth straight winning session on Wednesday before a sluggish turn early Thursday. Gold tends to fall as stocks climb because it is viewed as an asset that appeals to investors in times of uncertainty and fear.
However, the U.S. dollar has generated the strongest headwind for commodities priced in the currency, particularly gold. The ICE U.S. Dollar Index DXY, +0.46% was up 0.4% early Thursday, contributing to its weekly climb of about 0.7% and its year-to-date rally of about 3.6%, according to FactSet data.
A stronger buck can make assets pegged to it more expensive to buyers using other currencies.
Greenback has enjoyed a rebound as investors have turned to the U.S. as a source of safety during an escalating trade spats between the U.S. and its major partners across the globe.
Moreover, signs that the Federal Reserve will continue to raise benchmark interest rates this year as it endeavors to normalize crisis-era monetary policy has somewhat bolstered the case for bullish dollar bets and helped propel key interest rates higher. The 10-year benchmark Treasury note TMUBMUSD10Y, +0.93% was near 2.90%, compared with 2.831% last Friday. Rising rates can undercut appetite for commodities that don’t offer a yield like bullion.
Independent market analyst Stephen Todd, a research note, said gold “can’t get out of its own way.” He has maintained a bearish outlook on the metal for more than a month.
Other metals also showed signs of faltering, September silver SIU8, -1.95% tumbled by 32 cents, or 2.1%, to $15.260 an ounce, on track for its lowest close since early 2016.
A silver fund, the iShares Silver Trust SLV, -0.27% closed down 1.7% for the week, as of Wednesday’s settlement.
Looking ahead, investors will watch economic reports on employment and manufacturing. A report on weekly jobless claims us due at 8:30 a.m. Eastern Time, with 224,000 Americans forecast to have filed for unemployment claims last week, while the Philadelphia Fed index for July is set to be released at the same time, followed by a gauge of leading economic indicators for June at 10 a.m.