Gold Drops on Dollar Strength

Gold drops on dollar strength

Gold drops on dollar strength with the yellow metal slipping over $10 an ounce overnight to just below the $1,800 mark.

Mounting cases of the delta variant of the coronavirus have given investors the jitters and caused equities to go on roller-coaster ride so far this week. The Standard & Poor’s 500 Index gained 1.5% Tuesday after tumbling 1.6% Monday in the largest drop in two months.

Optimism that the U.S. economy will outperform the rest of the world in the near term has bolstered the dollar, which traded near a three-and-a-half-month high, weakening gold as an alternative investment.

August gold futures rose 0.1% Tuesday to settle at $1,811.40 an ounce on Comex. The front-month contract, which traded near a four-week high last week, slipped 0.2% in the first two days of the week. Gold has increased 2.3% so far in July. It fell 7% in June in the worst month since November 2016 after advancing 7.8% in May, the best month for the precious metal since July 2020. Gold climbed $372 — or 24% — in 2020 because of uncertainty about the economy and the pandemic and is down 4.4% so far in 2021. The August contract is down $12.60 (-0.70%) currently to $1,798.80 and the DG spot price is $1,799.70.

September silver futures fell 0.6% Tuesday to settle at a three-month low of $25.00 an ounce on Comex. The front-month contract lost 3.1% in the first two days of this week and is down 4.6% so far this month. Silver fell 6.5% in June after rallying 8.3% in May. The metal rose 47% in 2020 and is down 5.4% so far this year. The September contract is currently up $0.085 (+0.34%) an ounce to $25.080, while the DG spot price is $25.10.

Silver price are tied to industrial demand, which could taper if lockdowns are reinstated and dampen manufacturing.

The delta variant, a more infectious strain of COVID-19, makes up 83% of new U.S. cases of the coronavirus, according to the U.S. Centers for Disease Control and Prevention. The strain is triggering renewed lockdowns around the world and has increased concern that the pandemic isn’t over yet, but vaccination hesitancy remains among Americans.

The average number of new daily cases of COVID-19 in the U.S. is up 66% from last week and has more than doubled from two weeks ago, according to data from Johns Hopkins University. Hospitalizations are also up 26% from last week.

Investors will continue to watch for signals on how the economy is dealing with the latest development in the pandemic, including inflation and what the Federal Reserve will do about it, and how the labor market is performing. Gold is a traditional hedge against inflation.

In upcoming economic news, the latest U.S. weekly jobless claims report is due out on Thursday along with the U.S. existing home sales report. U.S. weekly initial jobless claims reached a pandemic-era low in the report released last week. The European Central Bank is also scheduled to release a rate decision Thursday.

Spot palladium increased 2.2% Tuesday to $2,657.50 an ounce and is up $2.50 so far this week. It’s down 4.9% in July and up 8.4% so far in 2021. Currently, the DG spot price is up $17.60 an ounce to $2,673.00.

Spot platinum slipped 10 cents Tuesday to $1,076.60 an ounce and fell 3.5% so far this week. It’s down 0.4% so far in July. The autocatalyst metal is up 0.3% in 2021. The DG spot price is currently up $3.50 an ounce to $1,079.70.

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