Dollar weakness weighs on bullion

london — Gold edged higher on Monday as uncertainty over US tax reform weighed on the dollar, while an analyst said bullion may face renewed headwinds early next year.

The dollar dipped against a basket of major currencies on Monday amid caution ahead of a vote in US Congress on tax reform, making dollar-denominated bullion cheaper for buyers using other currencies.

“If the whole thing [tax reform] falls apart at the last minute, it would be hugely positive for gold, but I think that is unlikely,” said analyst Carsten Menke at Julius Baer in Zurich. If the tax bill passes, gold might dip slightly, but that scenario is largely priced in the market, he added.

Top US Republicans said they expected Congress to pass a tax code overhaul this week, with a Senate vote as early as Tuesday.

Expectations that tax cuts would spur economic growth and prompt faster interest rate rises in the United States have boosted the dollar and weighed on gold.

Spot gold was up 0.2 per cent at $1,257.90 an ounce by 1030 GMT while US gold futures rose 0.3 per cent to $1,260.60 an ounce.

Spot gold faces a resistance at $1,262 per ounce and may hover below this level or retrace to a support at $1,239, Reuters technicals analyst Wang Tao said.

Looking at 2018, Menke expects a final bout of dollar strength to hit gold, sending prices down $25-$50, but then gold should recover. — Reuters