Gold touches 2-month high as Trump unease hits dollar

london — Gold rose on Monday, touching its highest in two months as unease over the economic policies of US President Donald Trump pushed investors towards safer assets and the dollar and US bond yields fell.

Trump at his inauguration promised to put “America first”, while his administration said it would withdraw from or renegotiate important trade agreements, raising fears that a protectionist White House could reduce global trade.

Uncertainty over Trump’s policies sent the dollar to a 1-1/2 month low against a basket of currencies, while bond yields slipped from recent highs. 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 0.2 per cent at $1,212.06 an ounce at 1110 GMT. It earlier touched $1,219.43, its highest since November 22. US gold futures were 0.6 per cent higher at $1,212.

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

Gold finished last week one per cent higher, its fourth straight week of gains and longest consecutive string of weekly increases since July. Underscoring the bullish view, data from the US Commodity Futures Trading Commission (CFTC) showed that speculators raised their net long positions in COMEX gold contracts in the week to January 17 for a second week. Precious metal funds also had their biggest inflows in five months in the week to January 18, according to Bank of America Merrill Lynch.

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

But gold faces resistance at $1,219 that it may struggle to break, according to Reuters technical analysis. The gains may also be derailed by US interest rate rises that could begin as early as March, faster than expected by the market, said Danske’s Pedersen.

“That would be negative for gold and counter the effect of political uncertainty,” he said. — Reuters