US tax plan pushes gold to 6-week low

The Gulf Today - Business - - Front Page -

LON­DON: Gold touched a sixweek low on Thurs­day af­ter the dol­lar and US bond yields rose on pro­posed US tax re­forms and strong eco­nomic data that sup­ported the case for another US in­ter­est rate hike this year.

US stocks rose and the dol­lar hit its high­est level since mid-au­gust be­fore slip­ping as mar­kets bet Pres­i­dent Don­ald Trump’s tax-cut­ting plan would ac­cel­er­ate eco­nomic growth.

Ex­pec­ta­tions of higher US debt lev­els and a De­cem­ber in­ter­est rate rise pushed 10-year Trea­sury yields to a 2-1/2-month high, helped by data point­ing to un­der­ly­ing strength in the US econ­omy and a hawk­ish speech by Fed­eral Re­serve Chair Janet Yellen. A stronger dol­lar makes gold more ex­pen­sive for hold­ers of other cur­ren­cies, while higher bond re­turns re­duce the at­trac­tive­ness of non-yield­ing bul­lion. In­ter­est rate in­creases raise bond yields and tend to boost the dol­lar. “These de­vel­op­ments are not some­thing gold can thrive on,” said Saxo Bank an­a­lyst Ole Hansen.

“It’s nat­u­ral we see weak­ness com­ing through.” Spot gold was up 0.2 per cent at $1,283.86 an ounce at 1418 GMT af­ter hit­ting $1,277.26, its low­est since Aug. 16. US gold fu­tures for De­cem­ber de­liv­ery were 0.1 per cent lower at $1,286.80. Spec­u­la­tive fund in­vestors were stick­ing with gold and de­mand was un­der­pinned by geopo­lit­i­cal wor­ries over North Korea’s nu­clear pro­gramme and an in­de­pen­dence vote in Iraqi Kur­dis­tan, Hansen said.

“The fund long po­si­tion has not been much re­duced in re­cent weeks even though gold has re­traced half of its July-to-septem­ber rally... That in­di­cates gold is less ex­posed to a ma­jor sell­off,” he said. Tech­ni­cal Fi­bonacci sup­port for gold was at $1,281.30, an­a­lysts at Sco­ti­amo­catta said.

The 100-day mov­ing av­er­age was at $1,271. In other met­als, plat­inum was up 0.1 per cent at $916.95 an ounce and pal­la­dium was 0.2 per cent lower at $924.88, a day af­ter pal­la­dium hit price par­ity with plat­inum for the first time since 2001. Both met­als are pri­mar­ily con­sumed by au­tomak­ers for cat­alytic con­vert­ers, but plat­inum is more heav­ily used in the diesel ve­hi­cles that have fallen out of favour.

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