Gold prices finished with a loss on Thursday to tally a second straight monthly decline, as pressure from the U.S. dollar index's gains in May outweighed concerns about a global trade spat.
Prices for the haven metal had initially turned a bit lower early Thursday when a round of economic data, a curtain-raiser to the closely watched monthly payrolls report due Friday, did little to sway expectations that Federal Reserve will raise interest rates next month.
After the White House announced that it will impose tariffs on steel and aluminum from Canada, Mexico and the European Union starting Friday, prices for gold moved decidedly higher, before falling back again by the settlement.
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August gold GCQ8, -0.03% lost $1.80, or 0.1%, to settle at $1,304.70 an ounce. The contract ended about 1.6% lower for the month. Based on the most-active futures contracts, gold was down about 1.1% in May. The metal hit a fresh 2018 low in mid-May and cracked the downside of a $1,300-to-$1,350 range that had confined gold for much of this year.
The ICE U.S. Dollar IndexDXY, -0.10%slipped 0.1%, after hitting a 10-month high earlier this week. Higher volume takes place in the dollar-priced gold market, leaving the commodity sensitive to the greenback's moves. The index traded roughly 2.4% higher for the month.
"The primary headwind for gold is the trend for a stronger U.S. dollar," said Michael Armbruster, managing partner at Altavest. "Interest-rate differentials favor the U.S. dollar, so we expect the U.S. Dollar Index to continue to trend higher."
He said that "geopolitical turmoil around the globe may keep gold anchored, but gold's near-term prospects are likely sideways to lower given our expectations for a much stronger dollar."
One chart watcher, however, stressed the importance of comparing dollar-priced gold to euro-priced gold, which could point to a bullish turn for the metal. Tom McClellan, technical analyst and editor of the McClellan Market Report, tweeted this week about euro-priced gold's move to a two-year high. "The [euro] price of gold broke its declining tops line in April, a feat that the [dollar] price has yet to match," he wrote. "When the two plots disagree, the euro price plot usually ends up being right."
Meanwhile, the latest Italian headlines indicated that President Sergio Mattarella will give populist leaders more time to form a government, a move that could stave off fresh elections, the threat of which triggered an early-week selloff for global markets.
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"Understandably, some market participants want to see actual progress in the Italian political stalemate. Meanwhile, Spain is the next European country to test the region's stability as Prime Minister Mariano Rajoy faces a confidence vote by Friday. Then there's that nagging trade dispute between the world's largest economies - the U.S. and China - while Nafta talks have also stalled," said Fawad Razaqzada, analyst at Forex.com.
"On top of all this, speculators have to consider the impact of Friday's payrolls data on indices and the dollar and what this may mean for the major [currency] pairs and buck-denominated gold and silver," he said.
Gold futures prices had ended higher Wednesday, but edged slightly lower in electronic trading when the Federal Reserve's Beige Book, a snapshot of domestic economic activity, showed the U.S. grew "moderately" from late April to early May, indicating to most that the central bank remains on track to raise interest rates next month.
Thursday's data largely backed that view. Consumer spending jumped for a second straight month though the yearly change in the Fed's preferred inflation gauge didn't budge. Another report showed a drop in weekly jobless benefits claims.
In other trading, July silver SIN8, -0.02% fell 0.5% to $16.458 an ounce, with the contract up nearly 0.5% for the month. July copper HGN8, +0.10% ended at $3.065 a pound, down 0.1% for the day, and down 0.5% for the month. July platinum PLN8, -0.03% added 0.2% to $910.10 an ounce, settling up 0.4% for the month. September palladium PAU8, +0.04% rose 0.7% to $981.70 an ounce, for a monthly rise of 2.7% for the contract.
Among exchange-traded funds, the SPDR Gold Shares GLD, -0.22% lost 0.1%, trading down 1.1% for the month, while the iShares Silver Trust SLV, -0.58% shed 0.4%, leaving it set for a monthly gain of 0.7%. The VanEck Vectors Gold Miners ETF GDX, -0.45% was down 0.5%, still up 0.2% for the month.