Gold up but US rate hopes cap gains

london — Gold touched its highest in nearly two weeks on Tuesday, supported by a softer dollar and geopolitical tensions in Spain and North Korea, though gains were capped by expectations of another US interest rate increase.

Investors were particularly wary on Tuesday as Pyongyang celebrated the founding of its ruling party, a day after Russia and China both called for restraint on North Korea following a Twitter post from US President Donald Trump hinting that military action was on his mind.

In Spain, Catalonia’s secessionist leader Carles Puigdemont is due to address the region’s parliament in Barcelona, where he could ask the assembly to vote on a unilateral declaration of independence.

The dollar index ran into some profit-taking but was still in reach of a 10-week high scaled on Friday when surprisingly strong US jobs data enhanced already high expectations that the Fed would raise rates in December.

“The Fed is going to raise rates, so we see gold breaking out of the (current) range down to the $1,250 level, with geopolitical tensions supporting the downside,” said Societe Generale analyst Robin Bhar.

Spot gold was up 0.4 per cent at $1,291.53 an ounce by 1009 GMT, having earlier touched its highest since late September at $1,291.82. US gold futures for December delivery climbed 0.7 per cent to $1,294.20. Fed funds futures showed traders were pricing in a nearly 90 per cent chance of a December rate increase.