Gold price rises as dollar dips, stocks hit highs

New York (Jan 23)  Gold prices rose on Tuesday as the dollar weakened to near three-year lows, but an end to the uncertainty created by a three-day U.S. government shutdown capped gains.

Gold was mostly unaffected by the shutdown in the previous session, trading in a tight range. Spot gold rose 0.3 percent to a near one-week high of $1,336.68 per ounce at 1126 GMT, while U.S. gold futures for February delivery climbed 0.3 percent to $1,335.70 per ounce.

"Dollar is mostly weakening and that has continued to be the number one supporter of gold," FOREX.com analyst Fawad Razaqzada said, adding that the robust performance of the euro and the pound had pushed gold higher in recent weeks.

The U.S. government shutdown had impacted the dollar, but was largely ignored by gold, Razaqzada said. The dollar index, which measures the greenback
against a basket of six major currencies, marginally lower and near a three-year low hit last week. A weaker greenback makes dollar-denominated assets such as gold cheaper for holders of other currencies.   
    The U.S. Senate voted on Monday to pass a temporary spending
plan through Feb. 8 to end the government shutdown.            
    Equity markets have since gained, with Wall Street's main
indexes surging to record highs.            
    Gold should see a first support level of $1,331 an ounce,
with initial resistance expected at the recent highs of $1,343
and closely followed by the psychological $1,350 mark, said MKS
PAMP Group trader Tim Brown in note.
    "A consolidation above that level could be the signal for a
push higher," he said.
    The market is also keeping an eye on an expected interest
rate increase in March, which could present risk to gold.
    "The anticipation of a March hike could act as additional
weight for gold, although given this is now largely anticipated,
the downside risks should be limited and gold's reaction
function is likely to be asymmetric," UBS said in a note.
    The U.S. economy is likely to grow in 2018 at its fastest
pace in three years, fuelled by the biggest tax overhaul since
the 1980s, according to a Reuters poll of more than 100
economists indicated.            
    Economic growth in the world's largest economy would
increase the likelihood of interest rate increase and dent the
appeal of non-interest yielding bullion.
    Platinum fell 0.5 percent to $990.20 per ounce, down
from a more than four-month high touched in the previous
session.
    In other precious metals, silver rose 0.2 percent to
$17.04 per ounce. Palladium was off 0.8 percent at
$1,089.50 per ounce.

Reuters