Firm dollar weighs on gold price, political uncertainty supports
London (Jan 30) Gold fell on Monday as the dollar rose, but losses were limited due to political uncertainty created by U.S. President Donald Trump's move to ban people from seven Muslim-majority countries as well as by elections in Europe. Traders reported subdued activity because of the Lunar New Year holiday in many Asian countries and some nervousness before the Federal Reserve's two-day meeting on monetary policy starting on Tuesday. Spot gold <XAU=> was down 0.2 percent to $1,188.85 an ounce at 0957 GMT compared with Friday's 2-1/2-week low of $1,180.65. U.S. gold futures <GCcv1> slipped 0.1 percent to $1,187.8.
A higher U.S. currency makes dollar-denominated gold more expensive for holders of other currencies, which could potentially weaken demand. "Gold's future direction will depend on the dollar, U.S. monetary policy and long-term interest rates," said Commerzbank analyst Carsten Fritsch, "The immigration ban added to risk-off sentiment and boosted gold earlier...
There is also political risk coming up in the form of elections in France and the Netherlands." [nL5N1FJ11B] Trump's administration tempered a key element of his immigration ban, but the move reinforces growing worries about investing in the United States, analysts said. [nL1N1FJ0CG] The Fed raised interest rates in December and at that time signaled as many as three rises in 2017 as the Trump administration takes over with promises to boost growth through tax cuts, spending and deregulation. [nL2N1CD25T] "We maintain a cautious view on gold, taking into consideration the expectation of an improving growth outlook, rising interest rates and a strengthening dollar," Julius Baer analysts said in a note. "That said, we acknowledge the upside risks related to recent actions taken by President Trump, such as the immigration ban. Should he become the feared ‘unguided missile', uncertainties would increase, fostering safe-haven demand and pushing gold prices significantly higher." Technically, gold is struggling to stay above the 21-day moving average around $1,191 an ounce.
A sustained break above is expected to meet resistance at $1,200 and $1,220, near the January highs. Support is at $1,176, the 55-day moving average. A negative for gold could be speculators cutting their net long positions in the futures market, after two straight weeks of increases, according to data from the CFTC, which also showed they raised their silver holdings to the highest since early November. [CFTC/] Spot silver <XAG=> lost 0.4 percent to $17.05 per ounce, platinum <XPT=> slid 0.9 percent to $974.74 and palladium <XPD=> ceded 1.1 percent to $727.7 per ounce.
Source: Nasdaq
