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Gold down on dollar after worst month in two years

Gold dropped on Monday, after falling by the most in two years in July, as the dollar rose

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Gold dropped on Monday, after falling by the most in two years in July, as the dollar rose and investors monitored U.S. economic indicators for clues on the timing of a hike in U.S. interest rates.

Spot gold was down 0.9 percent at $1,086.06 an ounce by 3:02 p.m. EDT (1902 GMT). The metal hit a low of $1,077 on July 24, its weakest in 5-1/2 years.

It lost almost 7 percent in July, its steepest monthly drop since June 2013, and fell for a sixth straight week last week, its longest retreat since 1999.

U.S. gold for December delivery settled down 0.5 percent at $1,089.40 an ounce.

Precious metal prices fell along with the 19-commodity Thomson Reuters/Core Commodity CRB Index, which dropped to a 12-year low, erasing almost all the gains of the decade-long commodities “super-cycle.” Speculators unleashed more selling on commodity markets on Monday after data showed conditions for Chinese manufacturers deteriorated to their weakest in two years.

“The dollar is back on the ascendant today, weighing on all commodity prices,” Mitsubishi Corp analyst Jonathan Butler said.

“U.S. economic data is the main focus right now, culminating with the nonfarm payrolls number later this week.”

The dollar was up 0.1 percent against a basket of leading currencies, cutting some gains after data showed U.S. consumer spending in June recorded its smallest gain in four months. Separately, the pace of growth in the U.S. manufacturing sector slowed in July.

Investors have been keeping a sharp eye on economic data as this could influence the timing of the first U.S. interest rate increase in nearly a decade. Nonfarm payrolls on Friday will be closely watched.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped to the lowest since September 2008 at 21.63 million ounces on Friday.

Industrial precious metal prices took a bigger hit than gold.

“What you’re seeing here is part of this structural shift lower in global economic growth being led by China and being reflected in industrial commodity prices,” said Mike McGlone, director of research for ETF Securities in New York.

Spot platinum dropped 2.6 percent to $955.74 an ounce, after posting the biggest monthly fall in ten months at 8.7 percent in July. Palladium lost 2.3 percent to $595.25 an ounce, nearing the lowest since October 2012.

Spot silver was down 2.2 percent at $14.44 an ounce, near last month's six-year low.