Gold prices on Monday slipped towards one-year lows as the dollar continued to strengthen against the currencies of key bullion consumers China and India.
Gold has tumbled 10 percent since mid-April as a surge in the greenback made dollar-priced bullion more expensive for buyers with other currencies. The metal was given respite last week when U.S. President Donald Trump branded the dollar's strength bad for the economy, knocking the currency down from one-year highs. But the breather proved short-lived.
"For gold to rise in a big way, we really need to see the dollar start to show some weakness," Saxo Bank analyst Ole Hansen said.
A war of words between Trump and Iranian President Hassan Rouhani helped to lift prices only briefly. Trump, in a tweet, told Rouhani on Sunday to "NEVER, EVER THREATEN THE UNITED STATES AGAIN" after Rouhani said hostile U.S. policies towards Tehran could lead to "the mother of all wars." Geopolitical instability often boosts gold, traditionally seen as a safe place to invest in times of uncertainty.
Gold's plunge in recent months has led banks and brokerages to downgrade their average gold price forecasts for this year and next, according to a Reuters poll published on Monday.
But respondents still expect the metal to bounce back towards $1,300 an ounce. One potential positive is a swing in speculative positioning that has seen funds' net short on the Comex exchange grow to the largest since January 2016.
"Such extreme positioning has frequently been an indicator of a pronounced countermovement in the near future," Commerzbank analysts wrote.
In 2016, the unwinding of the short position between January and July that year helped drive gold up more than $300 to a two-year high. Gold is also cushioned by technical support around $1,200-$1,220, including its July 2017 low of $1,204.90, the 50 percent Fibonacci retracement of the 2016 rally and the psychologically significant level of $1,200.
Silver was down 0.59 percent at $15.38, near its lowest since July last year. Respondents to the Reuters poll forecast silver would rebound and average $16.70 this year.
Platinum was up 0.46 percent at $830.30 after touching its lowest since 2008 last week, while palladium, up 1.95 percent at $911.47, bounced of off one-year lows. Prices of both metals are likely to recover, with platinum expected to average $922 this year and palladium to average $1,000, a Reuters poll found.