Gold prices headed toward back-to-back declines Wednesday, as a leading dollar index stabilized near a one-month low.
December gold GCZ8, -0.26% fell $4.30, or nearly 0.4%, to $1,210.10 an ounce, trading around 0.3% lower for the week so far. The ICE U.S. Dollar index DXY, -0.07% was nearly flat at 94.733 after tapping a high of 94.932. It’s still down about 0.4% week to date, but has gained 0.3% so far in August.
“Gold still seems to be a dollar story and the recovery of the last few days was mostly linked to the temporary weakness of the greenback,” said Carlo De Casa, chief analyst at ActivTrades, in a daily email.
Gold often trades higher when the dollar weakens, and vice versa, because the precious metal is most actively traded in the greenback. The dollar has been the primary driver for gold action in 2018, with the precious metal down about 8% this year through August. With the dollar now churning over recent sessions, however, gold had largely stabilized above $1,200 since grazing a 1 ½-year low in the middle of August.
“The bull run for gold has been very short-lived. One of the reasons that we have seen weakness in the gold price is because the U.S. economy is standing on robust ground and consumers are feeling confident about this as was evident in yesterday’s economic data,” said Naeem Aslam, chief market analyst with Think Markets.
“The most vital factor in play is the [Federal Reserve] rate-hike cycle. The rate hikes are pushing the dollar higher and for investors dollar is the more favorite instrument,” he said.
The Fed is expected to nudge its benchmark interest rate higher next month and again in December, plus follow up with additional moderate rate tightening in 2019, though the panel has recently noted bubbling concern for a trade-impacted economic slowing.
With that in mind, investors digested an upward revision to second-quarter GDP, running at a 4.2% clip. Data on July pending home sales, meanwhile, showed a decline of 0.7% in July. The sector has recently logged a number of weak data points, including an existing-home sales drop to a 2 1/2-year low.
Gold has also been contained as riskier asset classes shine. Major U.S. stock indexes aimed for their fourth straight advance Wednesday.
Read: Why gold has performed so poorly even though stock markets are volatile
From a technical point of view, the first support for gold is at $1,200, while the next key level is $1,180, De Casa said. “A rise above $1,210 would be a first positive impulse, with a potential target at $1,230.”
Among the exchange-traded funds, SPDR Gold Shares GLD, +0.30% added 0.3% Wednesday. The VanEck Vectors Gold Miners ETF GDX, +0.13% was up 0.1%.
In other metals trading, December silver SIU8, -0.70% eased 10.9 cents, or 0.7%, at $14.79 an ounce. High-grade copper for December HGU8, -0.86% retreated from Tuesday’s gain, last down 0.8% at $2.734 a pound. October platinum PLV8, -0.26% eased 0.2% to $793.40 an ounce, but December palladium PAU8, +0.61% added nearly 0.3% to $937.70 an ounce.
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