Gold price gives up early gains, tracking volatile euro-dollar amid German political uncertainty

November 20, 2017

New York (Nov 20)  Gold eased Monday, giving up early gains seen amid German political uncertainty. Relative stability for the euro as Monday’s trading session progressed helped the shared currency against the dollar, dulling some of the early demand shown for the haven metal.

Gold may consolidate short term after prices rallied Friday to a more than one-month high. The metal tacked on nearly 1.8% for last week, as the latest developments in the investigation into Russia’s interference in the U.S. presidential election raised concerns for the passage of potentially economy-boosting tax changes and knocked the dollar lower.

December gold GCZ7, -0.25% was down by $4.50, or 0.4%, to $1,292.10 an ounce. Gold last week scored an almost 1.8% weekly rise, its second advance in a row. The exchange-traded SPDR Gold Trust GLD, +1.20%  slipped 0.2% premarket, after it notched a weekly climb of 1.5%.

Gold fell even as the ICE U.S. Dollar Index DXY, -0.23%  fell 0.2% to 93.75. That breaks the typically inverse relationship between the two. DXY had traded up to 94.04 earlier. Against the dollar, the euro EURUSD, -0.1102%  fell to as low as $1.1723 on Monday, but then pared losses, rising to $1.1794, little changed from where it was trading late Friday in North America.

Angela Merkel’s conservative alliance won the September election but finished with its worst result since 1949, forcing the longtime German leader to try to cobble together a coalition with a majority in the country’s parliament. That effort hit a big roadblock late Sunday in Germany after the chairman of the small, pro-business Free Democratic Party ended talks with Merkel’s conservative camp and the center-left Greens.

But losses for the euro eased during Monday’s European trading session amid speculation and a German news report that the liberal Free Democratic Party is ready to support a minority government headed by Merkel.

“The news throws into question [Angela] Merkel’s future as German Chancellor. While she will remain as caretaker Chancellor, the form of the next government is now uncertain. This casts a huge shadow of uncertainty over all Europe. Decisions on everything from Brexit to sanctions on Russia will be more difficult and harder to predict,” said Marshall Gittler, chief strategist with ACLS Global.

”The uncertainty sparked a general risk-off mood that sent safe haven assets sharply higher. The Swiss franc and Japanese yen rose sharply ... gold and silver were also up sharply [initially],” he said.

December silver SIZ7, -0.97% fell 17 cents, or 1%, to $17.195 an ounce. It gained about 3% for all of last week. The exchange-traded iShares Silver Trust SLV, +1.18%  fell 0.5% early Monday.


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