Gold posted a fifth straight monthly decline, the longest losing run in half a decade, hit by a strengthening dollar and U.S. equities near record highs.
Gold futures for December delivery fell 2.2 percent this month as the metal barely rebounded 0.1 percent Friday on the Comex in New York. The Bloomberg Dollar Spot Index advanced in August as investors shunned bullion and flocked to the dollar amid U.S. trade disputes with other major partners, making the metal more expensive for users in other currencies.
The precious metal has also been dumped as investors weigh prospects for further tightening by the Federal Reserve amid a robust U.S. economy, with global holdings in gold-backed exchange-traded funds declining close to the lowest level since November. The latest developments on the trade-war front have further aided the dollar, with President Donald Trump expected to move ahead with tariffs on an additional $200 billion in Chinese imports as soon as next week, according to people familiar with the matter.
"The problem for gold bulls is that while inflation remains contained around the world and there's no driver there for people to buy gold, that strengthening U.S. dollar will be a key factor," Michael McCarthy, chief market strategist at CMC Markets in Sydney, said by phone. While there's potential for trade wars to slow global growth, that's not seen as a crisis and isn't likely to spur haven buying, according to McCarthy.
The metal settled at $1,206.70 an ounce at 1:31 p.m. on the Comex.
While prices have stabilized near $1,200 this month, bets on declines are still piling up with money managers boosting their net-short position to a record for a fifth straight week. Analysts at Citigroup Global Markets have said nobody needs gold in a world where yields and equities are rising.
Fed Chairman Jerome Powell said this month that gradual rate increases are likely, and that with inflation still low he wasn't worried about the economy overheating. The U.S. central bank looks set to deliver four more hikes before pausing, according to UBS Group AG's wealth management unit.
"In the short term, we'll have further strength in the dollar," said UBS's Wayne Gordon, Singapore-based executive director for commodities and foreign exchange. Beyond that, gold may get a reprieve "when people start to look more further forward to the Fed effectively reaching what it sees as neutral, or slightly above neutral," he said.