Gold price is steady as political concern cancels out rate hike fear

March 16, 2018

London (Mar 16)  Gold prices held firm on Friday as tension between the UK and Russia and renewed US political concern offset worry about a possible US rate increase next week.

Spot gold was unchanged at $1,315.50/oz at 2am GMT. Spot gold has fallen 0.6% so far this week. US gold futures for April delivery fell 0.2% to $1,315.20/oz.

Gold prices fell 0.7% in the previous session, under pressure from a stronger US dollar.

The dollar rose versus a currency basket as traders, awaiting next week’s Federal Reserve meeting, eyed data that showed the number of Americans filing for unemployment benefits fell last week. The US Federal Reserve will begin its two-day rate setting meeting on March 20, at which the US central bank is expected to raise interest rates for the first time this year.

"Investors are starting to focus on next week’s Fed meeting, which should be constructive for the dollar and bearish for gold," said INTL FCStone.

Gold is highly sensitive to rising US interest rates, because it becomes less attractive to investors since it does not bear interest.

Meanwhile, Moscow said it would retaliate against London’s move to expel 23 Russian diplomats over a nerve toxin attack on a Russian former double agent in Britain. Growing US political uncertainties following the recent departure of two key officials, former secretary of state rex Tillerson and top economic adviser Gary Cohn, from the Trump administration have also left investors worried.

Worry over the US investigation into the Trump Organisation also tested investor nerves, already frayed by the fear US tariffs could hurt the global economy and trigger a trade war.

US special counsel Robert Mueller had subpoenaed the Trump Organisation for documents, including some related to Russia, the New York Times reported on Thursday, citing two people briefed on the matter.

The rise of geopolitical tension between the UK and Russia was likely to have tempered any sell-off in gold despite a firmer dollar, Stephen Innes, Asia-Pacific trading head at Oanda said.

"Traders remain incredibly indecisive about the course of Fed policy, and all asset markets are enduring position adjustments where the lack of investor participation could exaggerate price action."

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.53% to 838.15 tonnes on Thursday from Wednesday. Holdings saw their highest inflows since January on Thursday.

Among other precious metals, silver was flat at $16.37/oz.

Platinum was steady at $953.90/oz, while palladium fell 0.1% to $985.50/oz.


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