Trump helps gold price scale highest levels since November
London (Jan 16) Gold climbed on Monday to its highest level in more than seven weeks on buying fuelled by political uncertainty after U.S. President-elect Donald Trump's comments on NATO and the "One China" policy.
Spot gold was up 0.4 percent at $1,202.4 at 1036 GMT from an earlier $1,207.86, it highest since Nov. 23. U.S. gold futures were up 0.5 percent at $1,202.50 per ounce.
Last week Trump said the "One China" policy on Taiwan was up for negotiation. China retaliated by saying it would "take off the gloves" and act strongly if U.S. President-elect Trump continues to "provoke" once he assumes office.
His comments on NATO being obsolete have also made investors nervous.
"There's the tussle between China and the U.S. over Taiwan. Trump has been talking to Taiwan, which the Chinese don't like. His comments on NATO are seen as negative," said Julius Baer analyst Carsten Menkeets
Investor interest can be seen in the largest physically backed exchange traded funds, New York's SPDR Trust, whose holdings rose for the first time since Nov. 9, the day after Trump won the election.
Hedge funds and money managers also raised their net long position in COMEX gold contracts for the first time in nine weeks, in the week to Jan. 10, U.S. Commodity Futures Trading Commission (CFTC) data showed on Friday.
"The market is taking a reality check from Trump euphoria, equity markets are moving sideways, the dollar has steadied and bond yields are down, allowing gold to recover," Menke said. The stronger dollar has in recent months weighed on gold, making it more expensive for holders of other currencies. Lower bond yields boost the attraction of gold as a risk-free asset.
Much will depend on Trump and his plans for the U.S. economy after his inauguration on Friday. But overall analysts expect the stronger dollar this year due to higher U.S. interest rates to cap gold's gains.
"Markets are pricing in three to four rate hikes for 2017. This will likely be the crippling factor for gold, as real yields start to rise, particularly if inflation remains modest," Standard Chartered analysts said in a note.
They added that Chinese buying has been hindered by limitations around gold import quotas and that buying ahead of the Lunar New Year has been soft.
"India has attempted to wean the country off gold and demand has been hampered by a raft of government policies clamping down on the parallel economy," Standard Chartered said.
Spot silver rose 0.1 percent to $16.81 an ounce.
Platinum prices slid two percent to $981.24, while palladium fell one percent to $741.08.
Source: Reuters
