Gold prices managed a slim early advance Friday, barely chipping away at a weekly loss as the metal remained pinned within the correction territory entered in the previous session.
Gold trades near a one-year low, a level largely maintained even as President Donald Trump voiced his displeasure with Federal Reserve rate increases in a late-week interview, prompting a Thursday decline in the benchmark dollar index that persisted on Friday.
And now, it was Trump’s latest remarks on a smoldering trade spat that filtered back into financial markets Friday.
August gold GCQ8, +0.52% was up 80 cents, or 0.1%, at $1,225 an ounce. The contract settled at $1,224 Thursday, posting the lowest finish for a most-active contract since July 2017. The settlement marked gold’s entry into correction territory—down more than 10% from its peak on Jan. 15 at $1,362.90. The futures are facing down a roughly 1.3% decline this week, according to FactSet data.
A popular fund used to bet on gold’s moves, SPDR Gold Shares GLD, -0.43% was trading around 1.5% lower for the week.
Gold paused its retreat in part as risk-on assets fell. From the market’s riskier corners, oil futures were on track for a third straight weekly decline and stock futures pointed lower. These markets fell as Trump said he was prepared to impose tariffs on all Chinese goods imported into the U.S.
The ICE U.S. Dollar Index DXY, -0.60% was down by 0.2%. It turned lower beginning Thursday after Trump told CNBC that he isn’t “thrilled” that the Fed is hiking interest rates. The dollar index was still up about 0.2% for the week. Overall, the dollar has enjoyed a rebound as investors have turned to the U.S. as a source of safety during escalating trade spats between the U.S. and its major partners across the globe. The dollar has generated the strongest headwind for commodities priced in the currency, particularly gold.
“Now, you would argue that the Fed is independent and President Trump’s musings would have no impact on Fed policy and this is merely a reaction to an oversold condition and the comments spooked the [gold] shorts,” said Peter Hug, global trading director with Kitco Metals. “But it may be the beginning of a bigger policy, whereby the U.S. wants to drive the dollar lower to make U.S. goods less expensive and offset some of the damage caused by reciprocal tariffs being proposed by our trading partners.”
“The trade war issues have not been fully priced into the financial markets, as most analysts continue to believe that the U.S. position is more one of posturing than execution,” Hug continued. “The lesson of yesterday was how closely the gold market is marching to the tune of the dollar and how vulnerable the dollar is to any suggestion that the Fed may back off. Volatility will remain with us until the elections in November.”