US tax plan pushes gold to 6-week low
LONDON: Gold touched a sixweek low on Thursday after the dollar and US bond yields rose on proposed US tax reforms and strong economic data that supported the case for another US interest rate hike this year.
US stocks rose and the dollar hit its highest level since mid-august before slipping as markets bet President Donald Trump’s tax-cutting plan would accelerate economic growth.
Expectations of higher US debt levels and a December interest rate rise pushed 10-year Treasury yields to a 2-1/2-month high, helped by data pointing to underlying strength in the US economy and a hawkish speech by Federal Reserve Chair Janet Yellen. A stronger dollar makes gold more expensive for holders of other currencies, while higher bond returns reduce the attractiveness of non-yielding bullion. Interest rate increases raise bond yields and tend to boost the dollar. “These developments are not something gold can thrive on,” said Saxo Bank analyst Ole Hansen.
“It’s natural we see weakness coming through.” Spot gold was up 0.2 per cent at $1,283.86 an ounce at 1418 GMT after hitting $1,277.26, its lowest since Aug. 16. US gold futures for December delivery were 0.1 per cent lower at $1,286.80. Speculative fund investors were sticking with gold and demand was underpinned by geopolitical worries over North Korea’s nuclear programme and an independence vote in Iraqi Kurdistan, Hansen said.
“The fund long position has not been much reduced in recent weeks even though gold has retraced half of its July-to-september rally... That indicates gold is less exposed to a major selloff,” he said. Technical Fibonacci support for gold was at $1,281.30, analysts at Scotiamocatta said.
The 100-day moving average was at $1,271. In other metals, platinum was up 0.1 per cent at $916.95 an ounce and palladium was 0.2 per cent lower at $924.88, a day after palladium hit price parity with platinum for the first time since 2001. Both metals are primarily consumed by automakers for catalytic converters, but platinum is more heavily used in the diesel vehicles that have fallen out of favour.