Gold weakens toward one-year lows as the greenback rebounds

NEW YORK/LONDON — Gold prices fell toward one-year lows on Monday as the US dollar held on to strength against the currencies of key bullion consumers China and India.

Gold has tumbled 10% since mid-April as a surge in the greenback made dollar-priced bullion more expensive for buyers with other currencies.

There was some respite for gold last week when US President Donald Trump branded the dollar’s strength as bad for the economy, knocking the currency from one-year highs, but the breather proved short-lived.

“We’re seeing a bid in the dollar that’s driving the gold low today, but we do think the dollar is set to weaken going forward, so we do see gold trading higher on the near term, two to three months outlook,” said Daniel Ghali, commodities strategist at TD Securities.

Spot gold was down 0.50% at $1,224.67 an ounce by 2:36 p.m. EDT ( 1836 GMT), close to last Thursday’s low of $1,211.08, while US gold futures for August delivery ended down 0.40% at $1,225.60.

A war of words between Mr. Trump and Iranian President Hassan Rouhani helped to lift prices only briefly. Mr. Trump, in a tweet, told Mr. Rouhani on Sunday to “NEVER, EVER THREATEN THE UNITED STATES AGAIN” after Mr. Rouhani said that hostile US policies towards Tehran could lead to “the mother of all wars.”

Geopolitical instability often boosts gold, traditionally seen as a safe place to invest in times of uncertainty. Gold’s plunge in recent months has led banks and brokerages to downgrade their average gold price forecasts for this year and next, according to a Reuters poll published on Monday.

But respondents still expect the metal to bounce back towards $1,300 an ounce.

One potential positive is a swing in speculative positioning that has seen funds’ net short on the Comex exchange grow to its largest since January 2016.

“Such extreme positioning has frequently been an indicator of a pronounced countermovement in the near future,” Commerzbank analysts wrote.

Gold is also cushioned by technical support around $1,200$1,220, including its July 2017 low of $1,204.90, the 50% Fibonacci retracement of the 2016 rally and the psychologically significant level of $1,200.

“I doubt if the dollar will be able to hold onto its gains following last week’s price action, so I am expecting gold to at least go a little higher this week with resistance coming in at $ 1,236 being our short- term bullish objective,” said Fawad Razaqzada, Forex. com market analyst.

Silver was down 0.85% at $15.34 an ounce after last week’s drop to its lowest since July last year. Respondents to the Reuters poll forecast that silver would rebound and average $16.70 this year.

Platinum was little changed at $826.50 an ounce after last week touching its lowest since 2008, while palladium rose from last week’s one-year low and was up 2.2% at $913.5.