Gold touches two-month high as Trump uncertainty weighs on greenback

NEW YORK/LONDON — Gold rose to a two-month high on Monday, as unease over the economic policies of US President Donald J. Trump pushed investors towards safer assets while the dollar and US bond yields fell.

Mr. Trump formally withdrew the United States from the TransPacific Partnership trade deal and told US manufacturing executives he would impose a hefty border tax on firms that import products after moving American factories overseas.

The US dollar fell to a sevenweek low against a basket of key world currencies and global stock markets declined amid investor concerns over Mr. Trump’s protectionist rhetoric.

A weaker dollar makes gold cheaper for holders of other currencies, while lower yields reduce the opportunity cost of holding non-yielding bullion.

Spot gold was up 0.60% at $1,216.33 an ounce by 3:22 p.m. EST (2022 GMT), after touching $1,219.43 — its highest since Nov. 22, while US gold futures settled up 0.90% at $1,215.6 per ounce.

“The story is one of a weaker dollar and political uncertainty,” said Danske Bank Analyst Jens Pedersen.

Bullion finished last week up 1% for its fourth straight week of gains after speculators raised their net long position in COMEX gold contracts for a second week in the week to Jan. 17.

“Momentum indicators are biased to the upside,” said ScotiaMocatta analysts, targeting $1,255.70 an ounce.

Despite his protectionist measures, Trump’s plans for government spending, tax cuts and deregulation would likely boost the dollar and US stocks if enacted.

“That is going to take some of the wind out of gold as an alternative investment or as a risk hedge,” said Mitsubishi Analyst Jonathan Butler.

Views of the gold market, however, seem divided over which aspects of Trump’s policies should be given greater weighs, said Standard Chartered in a note.

“Despite heightened uncertainty, we think Q1-2017 is still stacked unfavorably for gold given the fragile market in India ahead of the union budget (1 February) and the rising probability of US rate hikes,” Standard Chartered said.

Among other precious metals, palladium was down 1.7% at $772.50 an ounce, after touching $ 795.60, its highest since May 2015.

Analysts at Julius Baer said that investors had been too optimistic after palladium, which is used in the automotive industry for emission-controlling catalytic converters, jumped 4.80% last week.

Car sales this year in China and the US would fall short of investors’ hopes and “a dent is looming,” they said.

Among other precious metals, silver rose 0.60% at $ 17.17 while platinum gained 0.40% at $980.40. —