Dollar Index

Gold ended the week deep in the red on Friday. It marked the fourth consecutive losing session — a stretch the precious metals market has not seen in quite some time. Spot prices slipped another 0.7% and hovered near $4,620 per ounce in early trading. Futures performed even worse, plunging 1.3% to around $4,624. Looking at the week as a whole, the picture is grim for the bulls: gold lost roughly 2% over five trading days.

For an asset traditionally viewed as a safe haven, this behavior looks unusual. But that very unusualness is the story. Gold is currently trapped between two grinding forces: a strengthening U.S. dollar on one side and shifting expectations around Federal Reserve interest rates on the other. As long as those forces continue turning, the metal keeps sliding lower despite the geopolitical fears that would normally send it soaring.

The U.S. Dollar Index gained another 0.3% during Asian trading on Friday, climbing to a two-week high. For the week, the greenback was on track to rise more than 1% — a sharp reversal after months of speculation that the dollar was losing its dominance amid budget concerns and political instability in the United States.

But economic data released throughout the week shattered those bearish narratives. One report after another exceeded analyst expectations. Producer prices in April posted their strongest annual increase in four years. Four years is a long time in economic terms — enough for supply chains, consumer behavior, and entire market structures to change dramatically. Consumer inflation also came in hotter than expected, while retail sales painted a picture of an American consumer who continues spending despite expensive energy and broad uncertainty.

Under different circumstances, this combination of data might have fueled a rally in equities and perhaps...