Gold, silver driven down by rallying dollar

The recent solid rally in the U.S. dollar index has driven gold prices down to a five-week low in early U.S. trading on Monday. Silver prices were also weaker and hit a three-week low overnight as the rally continued to curtail buying interest in the precious metals markets.

June Comex gold futures were last down $9.80 an ounce at $1,313.70 while May Comex silver was down last $0.141 at $16.265 an ounce.

Working against the safe-haven metals also are upbeat trader and investor risk attitudes in the world marketplace. The easing tensions on the Korean peninsula appears to have spurred appetite for assets seen as higher risk such as stocks while the U.S. and China hold high-level trade talks this week, which could avoid a major trade war.

World stock markets were mostly higher overnight with U.S. stock indexes pointed toward higher openings when the New York day session begins. Meanwhile, solid corporate earnings reports released recently have supported world stock markets.

Spot gold was down 0.6 percent at $1,313.91 an ounce, off an earlier low of $1,313.51, its weakest since March 13. U.S. gold futures for June delivery were 0.7 percent lower at $1,314.60 an ounce.

“Easing geopolitical concerns and the strengthening dollar index are the factors which are creating the sell-off,” Naeem Aslam, chief markets analyst at Think Markets, said.

“We are looking at two important support levels $1,307 followed by $1,300,” he said. “A break of these levels would bring more selling pressure.”

At their summit on Friday, North Korean leader Kim Jong Un and South Korean President Moon Jae-in declared they would take steps to formally end the 1950-53 Korean War, which ended only with a truce, and work towards the “denuclearisation” of the Korean peninsula.

The dollar index was up 0.3 percent on Monday, holding just below its strongest since mid-January, while European shares rose after a positive session among Asian stocks overnight as tensions on the Korean peninsula eased.

Hedge funds and money managers cut their net long position in COMEX gold contracts and switched to a net long position in silver contracts in the week to April 24, U.S. Commodity Futures Trading Commission data showed on Friday.

“After nine consecutive weeks of a rare and even record net short silver position for money managers, the latest data shows that for the week ending Tuesday 24 the funds have returned to a slight net long,” ING said in a note.

“Prices had briefly rallied above $17/oz but failed to hold as gold prices also fell. The gold/silver ratio has since recovered back above 80x since briefly hitting lows of 78x.”