Gold slips

GOLD slipped yesterday as the dollar rose, but prices still held near one-month highs hit last week as political and economic uncertainty in the United States dominated sentiment.

Spot gold was down 0.2 percent at $1,292.1 an ounce at 1241 GMT off Friday’s peak of $1,297, its strongest since October 16. US gold futures were down 0,3 percent to $1,292.20 an ounce.

The dollar gained against the euro after German Chancellor Angela Merkel’s efforts to form a three-way coalition government failed. Merkel said she would inform the German president that she could not form a coalition, after the pro-business Free Democrats ( FDP) withdrew from negotiations.

The prospect of higher US interest rates in December when the Federal Reserve meets was also helping the dollar against other major currencies such as the yen.

“For gold, there are headwinds in the guise of US interest rate rises, which means higher frontend bond yield curves and an opportunity cost for holding gold,” said Societe Generale analyst Robin Bhar.

Higher rates typically mean sales of short-dated bonds, pushing up yields and make them cheaper for other investors, offering higher returns than gold which earns nothing and costs money to store and insure.

“Against the backdrop of overall benign financial markets,gold has been soft for most of this year, mirroring overall demand weakness in the physical gold market,” Julius Baer analysts said in a note.

However, concern about an investigation into alleged Russian meddling in the 2016 US presidential election and tax reforms in the United States were expected to help sustain gold. Reuters.