04/08/2015 11:10 AST
After a brutal July, gold futures started the week and the month of August on a dour note, with the precious metal is being weighed down by a stronger dollar ahead of a key employment report on Friday, which could set the tempo for the Federal Reserve’s first interest rate hike since 2006.
Renewed expectations that the Fed will hike rates as early as September has bolstered the dollar and diminished the appeal of the yellow metal, which has been trading at its lowest level in five years as the buck has gained momentum.
The ICE U.S. Dollar Index DXY, -0.13% a measure of the buck’s strength against a basket of six rival currencies, was ticking higher on Monday at 97.4950 from 97.2290 in late Friday trade.
“Gold is coming under pressure from all angles,” said Fawad Razaqzada, technical analyst at Forex.com told MarketWatch via email. “Clearly, gold traders are worried about the impact of the forthcoming U.S. interest-rate rise, which is underpinning the dollar and undermining the buck-denominated precious metal,” he said.
The metal could also be influenced by the July jobs report which is set to be released Aug. 7 at 8:30 a.m. Along with a battery of other economic reports due this week, the nonfarm-payrolls report will be a closely watched measure of the health of the U.S. economy for the data-dependent Fed.
The prospect of a rate hike increases the return on deposits in the currency, making it more attractive to traders. However, a strong buck reduces the attractiveness of dollar-denominated assets like gold, because it makes them more expensive to buyers in other currencies.
Razaqzada also noted that relatively “stronger equity markets” and the “lack of global inflation are also weighing on the price of gold.”
Gold for December delivery GCZ5, +0.16% which is now the most actively traded contract on Comex, shed $4.20, or 0.4%, to $1,090.90 an ounce. Gold settled at $1,095.10 an ounce on Friday.
For the month gold, logged a drop of 6.5%, its biggest decline since a slide of more than 12% in June 2013.
In other metals, September silver SIU5, +0.17% gave up 9 cents, or 0.9%, to trade at $14.65 an ounce, after trading.
October platinum PLV5, -0.78% fell $6.90, or 0.7%,to $978.10 an ounce, while September palladium was up $6.70, or 1.1% higher, to $617.55 an ounce.
September copper HGU5, +1.07% was down 2 cents, or 0.9%, to trade at $2.34 a pound.
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