Gold suffers biggest monthly decline of the year

Prices down five sessions in a row, settle at a four month low

SAN FRANCISCO (MarketWatch) — Gold prices on Friday logged their lowest settlement in four months and suffered from their worst monthly decline this year as recent gains in equities lured investors away from the precious metal.

August gold (CNS:GCQ4)  fell $11.10, or 0.9%, to settle at $1,246 an ounce on the Comex division of the New York Mercantile Exchange, marking a fifth straight session loss.

Tracking the most-active contracts, gold prices saw their lowest settlement since Jan. 31, according to FactSet data. They lost 3.5% for the week and 3.9% for the month — their biggest weekly and monthly declines of this year.

“Gold has been trading in a compressing range since March with prices being supported by geopolitics, while the broad strength in stocks has kept pressure on precious metals,” said Tyler Richey, an analyst for the 7:00’s Report, which offers daily markets commentary.

“This week, it was a combination of the Ukrainian elections going smoothly as well as the break to new all-time highs in the S&P [500] that sent gold futures plummeting to lows not seen since early February,” he said. “Going forward, inflation remains the key catalyst and although there are signs that inflation is bottoming (not only domestically but globally), it’s not going to be enough to initiate a gold rally just yet.”

Silver prices also suffered a weekly loss of 3.8% and monthly decline of 2.5%. July silver (CNS:SIN4)  shed 33 cents, or 1.8%, to end at $18.68 an ounce on Friday. Read: Two of the world’s leading commodities exchanges are competing to fix London’s silver fix.

Traders also looked at the latest U.S. economic data for guidance on the outlook for metals demand. Reports Friday said consumer spending in the U.S. fell in April — the first decline in a year, while in May, Chicago PMI accelerated and consumer sentiment fell.

Adding further pressure on gold, Friday marked the first notice day for June gold (CNS:GCM4) — and any remaining longs needed to be out before the Comex close, said Erik Gebhard, co-founder of Altavest Worldwide Trading. First notice day is the first day a futures contract buyer can be called on by the exchange to take delivery of the underlying commodity.

Still, “the current price weakness seems technically driven, as it is counterintuitive to the broader and longer-term macro fundamentals, i.e. central banks diversifying out of U.S. dollars and into gold (China and Russia), India relaxing import restrictions, geopolitical tension all around the world,” Gebhard said.

But the “cure for low prices is, low prices. Bulls will argue that the lack of bullish sentiment may serve as a contrarian signal and therefore prices could soon attract fresh buying interest,” he said.