London — Gold hit six-week highs on Wednesday as
investors worrying about political uncertainty bought the precious
metal, but dollar strength due to higher US rates is expected to cap
gains.
Spot gold was down 0.1% at 1186.45/oz at 10.44am GMT from an earlier peak at $1,191.32. US gold futures gained 0.3% to $1,188.70.
The trigger for early gains was US president-elect Donald Trump’s first formal news conference at 4pm GMT. Investors will focus on what Trump has to say about trade and relations with China and his plans for the economy.
"Major political risks include elections in France, the Netherlands and Germany, which could lead to tensions in the EU," said Quantitative Commodity Research analyst Peter Fertig.
"The uncertainty surrounding Brexit could lead to further demand for gold from retail investors in the UK."
Offsetting the political uncertainty argument is the US currency, holding near a 14-year high against a basket of currencies, making dollar-denominated commodities more expensive for holders of other currencies.
The US Federal reserve is expected to wait until the second quarter of 2017 before it raises rates. But after the December meeting, Fed policy makers signalled the possibility of three rises this year.
That may mean higher US treasury yields, making it cheaper for investors to buy US 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 and traders say, breaking back above $1,200 would need strong momentum.
Elsewhere silver was down 0.2% at $16.76/oz from Tuesday’s four-week high at $16.90.
Platinum slipped 0.2% to $976.25 from an earlier two-month peak at 982.60 and palladium dropped as much as 0.3% to $761.90/oz.
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 US boost car sales.
"While the medium to longer-term demand backdrop remains compelling, given its dominant usage in catalysts of [petrol] fuelled cars, we still expect a short-term dent," Julius Baer analysts said in a note.
Palladium has a strong 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."
Reuters/BDlive
Spot gold was down 0.1% at 1186.45/oz at 10.44am GMT from an earlier peak at $1,191.32. US gold futures gained 0.3% to $1,188.70.
The trigger for early gains was US president-elect Donald Trump’s first formal news conference at 4pm GMT. Investors will focus on what Trump has to say about trade and relations with China and his plans for the economy.
"Major political risks include elections in France, the Netherlands and Germany, which could lead to tensions in the EU," said Quantitative Commodity Research analyst Peter Fertig.
"The uncertainty surrounding Brexit could lead to further demand for gold from retail investors in the UK."
Offsetting the political uncertainty argument is the US currency, holding near a 14-year high against a basket of currencies, making dollar-denominated commodities more expensive for holders of other currencies.
The US Federal reserve is expected to wait until the second quarter of 2017 before it raises rates. But after the December meeting, Fed policy makers signalled the possibility of three rises this year.
That may mean higher US treasury yields, making it cheaper for investors to buy US 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 and traders say, breaking back above $1,200 would need strong momentum.
Elsewhere silver was down 0.2% at $16.76/oz from Tuesday’s four-week high at $16.90.
Platinum slipped 0.2% to $976.25 from an earlier two-month peak at 982.60 and palladium dropped as much as 0.3% to $761.90/oz.
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 US boost car sales.
"While the medium to longer-term demand backdrop remains compelling, given its dominant usage in catalysts of [petrol] fuelled cars, we still expect a short-term dent," Julius Baer analysts said in a note.
Palladium has a strong 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."
Reuters/BDlive
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