Greenback weakens, shares wobble after Trump’s speech

The dollar slid broadly on Monday after US President Donald J. Trump struck a protectionist tone in his inauguration speech, undermining optimism over the US economy spurred by his promises of tax cuts and other stimulus. Japan’s Nikkei dropped 1.1% while shares in Australia dropped 0.8%. US stock futures dipped 0.3%, erasing gains made on Friday.

GOLD prices rose on Monday to their highest in two months as investors sought safer assets amid uncertainty around the economic policies of new US President Donald J. Trump and as the dollar declined against other major currencies.

Spot gold was up 0.64% at $ 1,217.26 per ounce by 0617 GMT. Earlier in the session, it hit $1,219.43, the highest since Nov. 22.

US gold futures climbed as much as 1% to $1,217.

The dollar index, which measures the greenback against a basket of currencies, fell by 0.50% to 100.230.

RISK AVERSION RETURNS

Mr. Trump, who took power as the 45th President of the United States on Friday, pledged to end the “American carnage” of social and economic woes in an inaugural address that was a populist and nationalist rallying cry, prompting investor concern about protectionist trade policies.

With the lack of a clear policy direction from Mr. Trump, the market movement is a sign that risk aversion is back on the table, OCBC Analyst Barnabas Gan said.

The market could witness volatility into the first 100 days of the Trump administration, Mr. Gan added.

Data from US Commodity Futures Trading Commission ( CFTC) on Friday underscored investor’s bullish gold views.

The CFTC reported that speculators raised their net long positions during the week to Jan. 17 in COMEX gold contracts for the second straight week.

Bank of America Merrill Lynch said last week that precious metal funds had their biggest inflow in five months, according to data through to last Wednesday.

‘TRUMP TRADES’

Bond funds also notched a fourth consecutive gain over the last week, as investors continued to hedge against the so-called “Trump trades” put on late last year that bet on stronger growth and rising inflation.

Holdings of SPDR Gold Trust, the world’s largest gold- backed exchange-traded fund, rose 0.20% to 809.15 tons on Friday from 807.96 tons on Thursday.

Philadelphia Federal Reserve President Patrick Harker said on Friday that he expected three interest rate increases in 2017 if the labor market improves further and inflation moves to the Federal Reserve’s 2% goal.

“Tone set by Trump will likely lead the markets to conclude that Trump’s legislative goals may now be harder to achieve as there will not be much bipartisan goodwill or a honeymoon period to work with,” INTL FCStone Analyst Edward Meir said.

“All this means is that investors could now start to coalesce around the notion that the Fed will stay on hold for longer than expected, which in turn should be constructive for gold.”

Among other precious metals, silver increased by 0.70% to $17.20.

Platinum gained 0.30% to $978.95. Palladium rose 0.60% to $790.2. In the previous session, it hit $792.90, the highest since May 2015. —