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PRECIOUS-Trump trouble extends gold's gains


Reuters

  
* U.S. dollar falls to six-month low
    * Trump turmoil reduces rate hike expectations
    * Gold net long falls to two-month low

 (Updates prices)
    By Peter HobsonMay 22 (Reuters) - Gold extended its biggest weekly gain in
five weeks as a weaker U.S. dollar and political turmoil in the
United States fuelled demand for bullion as a safe haven and
reduced expectations of rapid U.S. interest rate rises.
    Spot gold <XAU=> rose 0.2 percent to $1,257.93 an ounce by
1221 GMT on Monday, while U.S. gold futures <GCcv1> gained 0.3
percent to $1,257.90.
    The metal advanced by 2.2 percent last week as the furore
over U.S. President Donald Trump's alleged links to Russia and
his firing of former FBI chief James Comey raised concerns about
his ability to push through promised fiscal stimulus.
[nL2N1IL16I] [nL1N1IN078]
    That caused a rush to safe-haven assets such as gold and
drove U.S. stocks, the dollar and U.S. bond yields lower,
reducing the opportunity cost of holding non-yielding bullion
and making gold cheaper for holders of other currencies.
    Stocks and bond yields have recouped some losses, but the
dollar touched a six-month low on Monday. [MKTS/GLOB] [US/]
<US10YT=RR> <.DXY>
    Gold investors were looking to news from Washington, said
Commerzbank analyst Carsten Fritsch.
    "If this escalates further and impeachment claims intensify,
Trump will find it very difficult to push forward his ambitious
tax cut and infrastructure spending plans," Fritsch told the
Reuters Global Gold Forum on Monday.
     INTL FCStone analyst Edward Meir said: "This should be
bullish for gold since it should keep the (U.S.) Federal Reserve
more dovish on the rate front for a little while longer."
    Higher interest rates would pressure gold prices because
they raise bond yields and tend to boost the dollar.
    St. Louis Federal Reserve President James Bullard said on
Friday that expected rate increases may be too fast for an
economy that has shown recent signs of weakness. [nL2N1IL0SW]
    However, Julius Baer analyst Carsten Menke believes that a
June rate rise remains highly likely.
    "(As a result) we expect the dollar to strengthen again and
that should cap the upside to gold from here," he said, adding
that the metal is likely to dip to $1,200 over the next three
months.
    Investors' net long positions in COMEX gold, meanwhile,
have fallen to a two-month low, U.S. Commodity Futures Trading
Commission (CFTC) data showed on Friday. [nL2N1IL1LS]
    In other precious metals, silver <XAG=> was up 1.1 percent
at $17 an ounce, having touched $17.13, its highest since May 1.

    Platinum <XPT=> tose 0.2 percent to $940.20 and palladium
<XPD=> was flat at $759.70.
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