Gold hits 5-month low on strong dollar

Gold edged lower yesterday, hovering just above an earlier five-month low, as the dollar and Treasury yields strengthened on expectations that President-elect Donald Trump will boost US spending. “Gold is suffering from an irrational dollar rally on expectations Trump’s fiscal policies will boost spending and therefore inflation, which could lead to higher US interest rates,” said ActivTrades chief analyst Carlo Alberto de Casa.

“However, uncertainty about the US economic outlook and also about international risk events such as the Austrian presidential election and the Italian constitutional referendum next month could have an impact on wider markets and impact gold’s trading in the medium term.”

Spot gold was down 0.2 percent at $1,223.51 an ounce by 1231 GMT. The metal fell 1 percent to $1,212.26 an ounce earlier in the session, its lowest since June 3. US gold futures were down 0.1 percent at $1,222.20 an ounce. The dollar rose to an 11-month high against a basket of major peers, while yields on the US 10-year Treasury notes climbed to their highest since January at 2.2 percent. A broad selloff in global commodities and surging bond yields had seen the metal dipping nearly 3 percent in the previous session. “People seem to have unwound their Trump-risk and are now talking more about ‘Trumpflation’,” said Jeffrey Halley, senior market analyst at OANDA. “The rate hike in December is an absolute done deal now.” The market is now betting on the Federal Reserve raising interest rates more quickly. Higher US interest rates could lift the opportunity cost of holding non-interest-bearing gold. — Reuters