Gold price touches two-month high as Trump unease hits dollar
New York (Jan 23) Gold rose on Monday, touching its highest in two months as unease over the economic policies of U.S. President Donald Trump pushed investors towards safer assets and the dollar and U.S. bond yields fell.
Trump at his inauguration promised to put "America first", while his administration said it would withdraw from or renegotiate important trade agreements, raising fears that a protectionist White House could reduce global trade.
Uncertainty over Trump's policies sent the dollar to a 1-1/2 month low against a basket of currencies, while bond yields slipped from recent highs.
A weaker dollar makes gold cheaper for holders of other currencies, while lower yields reduce the opportunity cost of
holding non-yielding bullion.
Spot gold was up 0.2 percent at $1,212.06 an ounce at
1110 GMT. It earlier touched $1,219.43, its highest since Nov.
22. U.S. gold futures were 0.6 percent higher at $1,212.
"The story is one of a weaker dollar and political
uncertainty," said Danske Bank analyst Jens Pedersen.
Gold finished last week 1 percent higher, its fourth
straight week of gains and longest consecutive string of weekly
increases since July.
Underscoring the bullish view, data from the U.S. Commodity
Futures Trading Commission (CFTC) showed that speculators raised
their net long positions in COMEX gold contracts in the week to
Jan. 17 for a second week.
Precious metal funds also had their biggest inflows in five
months in the week to Jan. 18, according to Bank of America
Merrill Lynch.
"Momentum indicators are biased to the upside," said
ScotiaMocatta analysts, targeting $1,255.70 an ounce.
But gold faces resistance at $1,219 that it may struggle to
break, according to Reuters technical analysis.
The gains may also be derailed by U.S. interest rate rises
that could begin as early as March, faster than expected by the
market, said Danske's Pedersen.
"That would be negative for gold and counter the effect of
political uncertainty," he said.
Two governors of regional branches of the U.S. Federal
Reserve said on Friday that economic strength warranted interest
rates increases.
Higher interest rates mean that bond prices fall and yields
rise, making such investments more attractive to those looking
for safe-haven assets. Though gold is such an asset, it does not
offer a yield to investors and costs money to store and insure.
Among other precious metals, silver was up 0.3 percent at
$17.11 an ounce.
Platinum was 0.6 percent higher at $982.2. Palladium
was up 0.1 percent at $786.5 an ounce. In the previous
session, it hit $792.90, the highest since May 2015.
Source: Reuters
