Gold futures started the week strong but ended on a weak note as the U.S. Dollar regained some of its appeals as a safe-haven currency amid renewed global trade concerns. Not only did the yellow metal close lower for the week, but it also posted its fifth straight monthly decline. Gold finished about 1.6 percent lower in August and is now down more than 7 percent this year.
For the week, December Comex Gold settled at $1206.70, down $6.60 or -0.54%.
Gold was supported early in the week after the United States and Mexico announced a new trade deal. This news weakened the dollar’s appeal as a safe-haven asset while increasing foreign demand for dollar-denominated gold.
Strong U.S. economic data also helped weaken gold prices. Preliminary U.S. Third Quarter GDP exceeded expectations, increasing the chances of a Fed rate hike in September and December.
Contributing to the weakness later in the week was a failure by the U.S. and Canada to reach a new trade deal although they will return to the negotiation table next Wednesday.
Perhaps the biggest factor driving gold prices lower late in the week was concern about an escalation in the U.S.-China trade dispute after fresh threats by U.S. President Donald Trump.
In other news, hedge funds and money managers cut their net short positions in COMEX gold contracts in the week to August 28 for the first time in more than a month, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.
The could be the first sign of a bottom in gold, but of course, everyone knew the number of shorts was going to drop because the data is stale and we saw it in the price action. In order to turn gold bullish, the hedge funds and money managers are going to have to shift to a net long position.
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This week, the emphasis will once again be on gold’s relationship with the U.S. Dollar. Gold could face extended selling pressure if the dollar is supported by trade dispute jitters or robust U.S. economic data.
According to Bloomberg, President Trump is prepared to ramp up the trade dispute with China and has told aides he is ready to impose tariffs on $200 billion more in Chinese imports as soon as a public comment period on the plan ends next week.
Traders will also get the opportunity to react to a slew of U.S. economic reports that could determine the pace of future U.S. Federal Reserve interest rate hikes.
On Tuesday, the U.S. will report on ISM Manufacturing PMI. It is expected to come in at 57.6, slightly below the previously reported 58.1.
Thursday will feature the ADP Non-Farm Employment Change report. It is expected to show the private sector added 188K jobs in August. This is down slightly from the 219K increase in July. ISM Non-Manufacturing PMI is forecast at 57.0, up from 55.7.
Friday will feature the most important U.S. Non-Farm Payrolls report. The headline number is forecast to show the economy added 191K jobs in August, up from 157K. The Unemployment Rate is expected to have held steady at 3.9%. Average Hourly Earnings, a key indicator of inflation, is expected to show a 0.3% increase, matching last month’s increase.