Gold price retreats from 6-week peak on strong dollar
New York (Jan 11) Gold retreated from six-week highs on Wednesday as the stronger dollar undermined confidence, but investor buying interest due to political uncertainty is seen supporting prices this year.
Spot gold was down 0.4 percent at 1,182.71 an ounce at 1443 GMT from an earlier peak of $1,191.32, the strongest since Nov. 30.
U.S. gold futures gained 0.2 percent to $1,183.2. The trigger for early gains was nervousness ahead of U.S. President-elect Donald Trump's first formal news conference at 1600 GMT. Investors will focus on what Trump has to say about trade, relations with China and plans for the economy.
"Trump's upcoming news conference seems to be the main highlight of the day and the dollar is said to be moving up on account of this," said INTL FCStone analyst Edward Meir.
Analysts say elections over the course of the year in
France, the Netherlands and Germany are likely to create
political tensions in the European Union and support gold.
"The uncertainty surrounding Brexit could lead to further
demand for gold from retail investors in the UK," Quantitative
Commodity Research analyst Peter Fertig said.
A higher U.S. currency, near a 14-year peak against a basket
of currencies, makes dollar-denominated commodities more
expensive for holders of other currencies.
Further gains for the dollar due to U.S. rate hikes during
the course of the year are possible. U.S. Federal Reserve policy
makers in December signaled the possibility of three rises this
That may mean higher U.S. Treasury yields, making it cheaper
for investors to buy U.S. government bonds, which like gold are
seen as risk-free. But unlike gold which earns nothing and costs
to insure and store, Treasuries earn regular coupons.
On the technical front, upside resistance kicks in around
$1,194, the 55-day moving average, though traders say breaking
back above $1,200 would need strong momentum.
Elsewhere, silver was down 0.9 percent at $16.64 an
ounce from Tuesday's four-week high of $16.90.
Platinum slipped 0.8 percent to $970.20 from an
earlier two-month peak at 982.60 and palladium dropped 2
percent to $748.78 an ounce.
Palladium touched a five-week high of $768.1 on Monday.
Investors expect the industrial precious metal will benefit if
tax cuts and higher government spending in the major car markets
of China and the United States boost auto sales.
"While the medium to longer-term demand backdrop remains
compelling given its dominant usage in catalysts of gasoline
fuelled cars, we still expect a short-term dent," Julius Baer
analysts said in a note.
Palladium has a close relationship with vehicle sales, which
were strong last year.
"Sales in China were fuelled by a tax cut, prompting
consumers to pull forward purchases. The tax cut was halved at
the beginning of this year and should result in lower sales over
the course of the coming months."