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Gold hits five-month peak on geopolitical tensions, weaker dollar

The U.S. dollar took a heavy hit after Trump told the Wall Street Journal the dollar “is getting too strong” and that he would prefer the Federal Reserve to keep interest rates low.

business Updated: Apr 13, 2017 13:26 IST
Reuters
Reuters
Bengaluru
gold,prices,stocks
(Reuters photo)

Gold rose to a five-month peak on Thursday amid rising tensions over U.S. relations with Russia and North Korea, with prices also buoyed as the U.S. dollar slid after President Donald Trump reportedly said the currency was too strong.

Spot gold earlier rose as much as 0.2% to 1,287.98 per ounce, the highest since Nov. 10. It was at $1,285.22 per ounce at 0713 GMT.

U.S. gold futures climbed 0.7% to $1,286.40.

The U.S. dollar took a heavy hit after Trump told the Wall Street Journal the dollar “is getting too strong” and that he would prefer the Federal Reserve to keep interest rates low.

“We see a lot of safe-haven buying coming back to the market ... People are worried about currency and with conflicts around the globe, a lot of funds are coming to gold at this point of time,” said Brian Lan, managing director at gold dealer GoldSilver Central in Singapore.

“The market is slightly on the overbought side, but given what we have seen in the past few days, we might see prices testing $1,300.”

Spot gold is expected to climb to $1,303 per ounce as it has broken above resistance at $1,282, according to Reuters technical analyst Wang Tao.

“We might see a bit of profit taking ahead of the Easter weekend,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

“But, we see prices going up further on global tensions and a weaker dollar, especially after Trump’s comments.”

The dollar slumped broadly on Thursday, falling to a five-month low against the yen.

The dollar index, which measures the greenback against a basket of currencies, was down 0.6% at 100.050.

“The Fed remains on track to raise rates two more times this year, but markets have yet to focus on a June increase, figuring that the Fed has time to perhaps change its forward guidance (if not its decision altogether),” said INTL FCStone analyst Edward Meir.

Higher interest rates reduce investor appetite for non-interest bearing gold while the weaker dollar makes gold more affordable for buyers paying in other currencies.

Meanwhile, tensions continued over the United States’ relationship with Russia over Syria and in the Korean peninsula, while worries about the upcoming French presidential election also kept investors nervous.

Russian President Vladimir Putin said on Wednesday trust had eroded between the United States and Russia under Trump as Moscow delivered an unusually hostile reception to Secretary of State Rex Tillerson in a face-off over Syria.

South Korea said on Thursday it believed it would be consulted by the United States before any possible pre-emptive U.S. strike against Pyongyang and China urged the North to halt its nuclear programme in exchange for greater protection from Beijing.

Spot silver was up 0.1% at $18.47, after hitting a five-month high of $18.56.

Platinum rose 0.4% to $972.20, while palladium was up 0.8% at $803.65.

First Published: Apr 13, 2017 13:25 IST