Why is gold trading near a 4-month low?

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April 23, 2019 12:46pm NYSE:GLD

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From Myra P. Saefong and Mark DeCambre: Gold prices on Tuesday headed sharply lower as one popular measure of the U.S. dollar teetered near a two-year high, producing headwinds for bullion.

Gold for June delivery GCM9, -0.24%  declined $6.30, or 0.5%, to trade at $1,271.30 an ounce, setting the commodity up for the lowest most-active contract settlement since late December, according to FactSet data.

“The safe-haven metals continue to be hamstrung by not much risk aversion in the world marketplace and by a strong U.S. dollar on the foreign exchange market,” said Jim Wyckoff, senior analyst at Kitco.com.

The moves come as the ICE U.S. Dollar Index DXY, +0.38% a key gauge of the greenback against six major rivals, was up 0.5% at 97.793, the highest level for the dollar index since June of 2017, according to FactSet data. A stronger U.S. unit can make buying the buck-pegged commodity comparatively more expensive for investors using other currencies.

Prices for gold had edged higher Monday. Gains in crude-oil prices raised “concerns about problematic inflation, as well as economic growth concerns,” Wyckoff said in a daily update. “Oil’s surge this week is mainly due to the U.S. not renewing waivers it had given to some countries on sanctioned Iranian crude oil imports. And with oil being arguably the leader of the raw commodity sector, crude’s rally should at least be limiting selling interest in the metals.” Gold is often used an a hedge against inflation.

Gold lost 1.5% for the holiday-shortened stretch last week, with financial markets closed for Good Friday and many markets in Europe closed then and for Easter Monday. Gold, in fact, marked its fourth weekly loss in a row, with a jump in U.S. retail figures providing support for the dollar and dulling the appeal of the precious metal. A climb near records for the S&P 500 index SPX, +0.87% the Dow Jones Industrial Average DJIA, +0.62% and the Nasdaq Composite IndexCOMP, +1.19% also has highlighted growing appetite for assets perceived as risky and away from safe investments.

Meanwhile, the SPDR Gold Shares ETF GLD, -0.22%  edged down 0.6% in Tuesday trade, while the miner-focused VanEck Vectors Gold Miners ETF GDX, -0.33% lost 0.8%.

Among other metals, May silver SIK9, -1.34%  lost 1.5% to $14.745 an ounce, while May HGK9, -0.12%  shed 0.7% to $2.882 a pound. July platinumPLN9, -0.93%  fell 1% to $893.60 an ounce and June palladium PAM9, +0.01% traded at $1,366.80 an ounce, down 0.2%.

The SPDR Gold Shares (GLD) was trading at $120.01 per share on Tuesday afternoon, down $0.36 (-0.30%). Year-to-date, GLD has declined -2.94%, versus a 10.24% rise in the benchmark S&P 500 index during the same period.

GLD currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #1 of 35 ETFs in the Precious Metals ETFs category.

This article is brought to you courtesy of MarketWatch.

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