Gold retreats as dollar climbs to start the week

Gold futures declined on Monday as the dollar showed some strength following a bout of weakness at the end of last week when President Donald Trump complained about Federal Reserve interest-rate hikes and a strong home currency.

Gold for August delivery on Comex GCQ8, -0.48% fell $5.90, or 0.5%, to $1,225.20 an ounce, giving back much of Friday’s 0.6% rise. Prices had settled at $1,224 on Thursday, the lowest for a most-active contract in about a year. September silver SIU8, -0.86% meanwhile, fell 14.9 cents, or 1%, to $15.40 an ounce in Monday dealings.

Trump complained about tightening Fed policy in a Thursday interview and reiterated his criticism via tweets that also accused China and the European Union of manipulating their currencies and interest rates. The dollar weakened, providing support for gold, though the metal still suffered a roughly 0.8% decline last week.

Treasury Secretary Steven Mnuchin over the weekend said he and Trump support the Fed’s independence. The ICE U.S. Dollar Index DXY, +0.17% a measure of the U.S. currency against a basket of six major rivals, edged up 0.1% to 94.56. Commodities such as gold often show inverse correlation with the dollar as a stronger currency makes them more expensive to users of other currencies and a weaker currency makes them cheaper.

Meanwhile, analysts at Commerzbank noted that data from the Commodity Futures Trading Commission showed speculators significantly expanded net short positions — bets the price will fall — to 26,400 contracts in the week to July 17, not far off the late 2015 record high. Extreme positioning is often seen as a contrarian indicator.

“Speculative market participants often behave in a very cyclical fashion, and in the past such extreme positioning has frequently been an indicator of a pronounced countermovement in the near future,” they wrote. “Very negative market positioning at the end of 2015 was followed by a surge in the gold price of roughly $300 in the first half of 2016.”

SPDR Gold Shares GLD, -0.44% the largest exchange-traded fund to invest directly in physical gold, was down 0.3%. The iShares Silver Trust SLV, -0.66% was off 0.5%.

In other metals trade, September palladium PAU8, +1.35% rose $10.80, or 1.2%, to $899.70 an ounce, while October platinum PLV8, +0.19% was up $3.30, or 0.4%, to $832.80 an ounce. September copper HGU8, -0.15% was down less than a cent, or 0.2%, at $2.75 a pound.

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