Gold slides, flirts with 17-month low as Turkey crisis again buoys dollar

Gold prices were hammered to 17-month lows on Monday as global investors flocked into dollars to take cover from the eroding financial crisis in Turkey, making the U.S.-priced precious metal less attractive to investors using other currencies.

December gold GCZ8, -1.03% fell $12.40, or 1%, to $1,206.40 an ounce. A close at this level would mark the lowest for the futures contract since a settlement just above $1,200 on March 15, 2017. The contract logged a 0.3% weekly decline last week.

A popular metals exchange-traded fund, the SPDR Gold Trust GLD, -0.04% dropped over 1% premarket after it declined 0.2% for the five-day period through Friday. GLD holdings at 25.3 million ounces have dropped about 10% from their April peak and are at their lowest since February 2016, analysts have noted.

Turkey’s currency USDTRY, +7.0229% plunged again on Monday, sending shock waves through other emerging markets. After falling around 10%, the lira pared gains but remained sharply lower after Turkey’s central bank made policy moves that failed to fully alleviate investor worries.

The turmoil provided support for traditional haven currencies like the Japanese yen and Swiss franc and lifted the dollar versus most rivals. The ICE U.S. Dollar Index DXY, +1.22% a measure of the U.S. unit against a basket of six major rivals, rose 1.4% to 96.47 to trade at its highest level ion more than a year. It gained 1.3% last week.

The gold market’s almost singular focus on dollar trading in the short term has limited its own ability to draw haven demand tied to global market unrest. Beyond the geopolitical churning, the dollar has been underpinned, and nonyielding gold has suffered as a result, by expectations for two more Federal Reserve interest-rate hikes this year and three next year.

“When you have mavericks like U.S. President Trump [engaging in a trade fight with China and others] and President Erdogan of Turkey in charge, anything could happen. Liquidity is already low, and summer trading increases potential for erratic moves,” said Richard Perry, analyst with Hantec Markets, summing up the ripples through global markets, including gold.

He said a close above $1,204 for the precious metal, the 12-month low, could be key for gold to ward off deeper losses.

Bearish gold sentiment is reflected in data from U.S. Commodity Futures Trading Commission, which showed gold speculators added 22,195 contracts to their net short position in the week to Aug. 7, bringing it to 63,282 contracts, for the largest since records became publicly available in 2006, according to Reuters data.

Around other trading, September silver SIU8, -0.88% skidded 17 cents, or 1.1%, to $15.12 an ounce. It marked a 1% weekly fall, according to FactSet data, and has declined 8.7% over the past three months.

The comparable silver ETF, the iShares Silver Trust SLV, -0.76% traded down 1.1% early Monday and had dropped about 0.7% for last week.

September copper HGU8, -0.11% fell 2 cents, or 0.8%, to $2.719 a pound. For last week, copper lost 0.9%.

Other industrial metals were harder hit. October platinum PLV8, -1.99% fell $16.40, or 2%, to $813.20 an ounce. They risked a return to the $800 line, a 10-year low, hit last month due to heavy supplies on the market. On Monday, prices were impacted by a two-year low for South Africa’s rand against the dollar, falling as emerging market worries spread from Turkey. South Africa is the world’s top producer of platinum.

September palladium PAU8, -1.25% fell $13.00, or 1.4%, to $888.10 an ounce.

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