Gold falls as hopes of US tax reform lift riskier

Spot gold down 0.5% at $1,282.90 an ounce, taking losses this week to 1.6%

Gold prices fell yesterday after the US Senate approved a budget blueprint that paves the way for tax cuts, causing European stocks, the dollar and bond yields to rise as investors betting on faster economic growth bought riskier assets.

The Republican-controlled Senate voted by 51-to-49 late on Thursday for the measure, which clears a hurdle to President Donald Trump’s plans to reduce taxes by up to $6 trillion (Dh22 trillion). Higher bond yields increase pressure on bullion because gold does not offer a yield, while a stronger dollar makes it more expensive for holders of other currencies.

Investors may also see tax cuts as a cause for higher US interest rates, said INTL FCStone analyst Edward Meir. Higher rates would push up bond yields and the dollar.

Spot gold was down 0.5 per cent at $1,282.90 an ounce at 1033 GMT, taking losses this week to 1.6 per cent.

US gold futures for December delivery were 0.4 per cent lower at $1,285 an ounce. “We seem to once again be ready to test technical support around $1,275-$1,270,” said Mitsubishi analyst Jonathan Butler.

“The danger is we’ll break lower to a level at $1,250 or even below.”

Analysts at Commerzbank said gold’s failure to remain above $1,300 could prompt speculative investors betting on higher prices to exit their positions, pushing prices lower.