Gold price hits two-week low as Abe election victory lifts dollar

London (Oct 23)  Gold hit a more than two-week low on Monday as expectations that Japan's ultra-loose monetary
policy would stay in place after Prime Minister Shinzo Abe's election victory at the weekend lifted the dollar to a
three-month high versus the yen.

Abe's win also fed into positive sentiment in equity markets that were buoyed last week by fresh optimism about tax cuts in
the United States, curbing interest in gold as an alternative asset.

Spot gold was down 0.4 percent at $1,275.80 an ounce by 1130 GMT, having touched its lowest since Oct. 6 at
$1,273.61. U.S. gold futures for December delivery fell by $3.50 to $1,277.00.
    "(Gold) is just following what the dollar is doing," said
Natixis analyst Bernard Dahdah. "People are also getting more
excited about the stock markets, and that removes a bit of
business from gold."
    The metal could drift down towards the $1,250 level by early
December, he said, as the prospect of a further U.S. interest
rate hike weighs.
    Gold is highly sensitive to rising U.S. rates, which lift
the opportunity cost of holding non-yielding bullion while
boosting the dollar, in which it is priced.
    The dollar had already posted its biggest one-day gain in a
month on Friday after the U.S. Senate approved a budget
blueprint for the 2018 financial year, allowing Republicans to
pursue a tax-cut package without Democratic support.      
           
    Financial markets are now awaiting guidance on who will
succeed Federal Reserve chair Janet Yellen when her term expires
in February.            
    U.S. President Donald Trump is considering nominating Fed
Governor Jerome Powell and Stanford University economist John
Taylor for the central bank's top two jobs. Powell is considered
less hawkish than Taylor, who is seen advocating higher interest
rates.            
    "As the path toward tax reform in the U.S. begins to take
shape and the identity of next Fed Chair becomes clearer, we are
likely to see the U.S. dollar strengthen further against
majors," MKS said in a note on Monday.
    "Tensions on the Korean peninsula, however, continue to
weigh upon participants' minds and as a result we are likely to
see interest towards $1,250 restrict further (gold) declines."
    Hedge funds and money managers cut net long positions in
COMEX gold contracts for the fifth straight week in the week to
Oct. 17, U.S. data showed on Friday.       

Among other precious metals, silver eased by 0.3
percent to $16.95 an ounce, platinum was down 0.9 percent
at $912.24 and palladium lost 1.4 percent to $961.72.

Reuters