Gold price touches three-month high
London (Feb 8) Gold hit a three-month peak on Wednesday as the political risk of European elections and worry over US President Donald Trump’s policies stoked safe-haven demand.
Investors are concerned about the strong showing in the French presidential race of far-right candidate Marine le Pen, who has promised to take France out of the eurozone and to hold a referendum on European Union membership. The euro fell another third of a percent against the dollar on these risks, although investors are also wary about Trump’s protectionism and immigration policy and his hints that he would prefer a weaker dollar.
"There’s underlying demand for gold as a hedge against political uncertainties on both sides of the Atlantic," said Ole Hanson, head of commodity strategy at Saxo Bank. "Retracements have been quite shallow the past couple of weeks, especially the signal that gold wasn’t going down when the dollar started going up," he added.
Spot gold rose 0.2% at $1,236.16/oz by 11.17am GMT, having earlier touched its highest since November 11 at $1,237.90. US gold futures rose 0.2% to $1,238.30/oz.
Indicating heightened worry over the French elections, the gap between French 10-year government bond yields and their low-risk German equivalents was at its widest since November 2012.
"Gold prices will continue to rise until mid-February on uncertainties in the US and Europe. But once January CPI [consumer price index] data is released, it will give an idea about the possibility of a rate hike in March," said Jiang Shu, chief analyst at Shandong Gold Group.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, climbed 1.01% to 826.95 tonnes on Tuesday from Monday. Holdings rose for a fifth consecutive session. The rise in holdings, along with recent data from US Commodity Futures Trading Commission (CFTC), showed an increase in long positions for managed money and a decrease in short holders, MKS Pamp Group trader Alex Thorndike said.
A bullish target at $1,249/oz had been temporarily aborted for spot gold and would only be resumed when the metal broke above resistance at $1,237, said Reuters technical analyst Wang Tao.
Spot silver rose 0.2% to $17.69, after marking its highest since November 11 at $17.79 in the previous session. Platinum rose 0.9% to $1,012.70, after touching its highest since November 9 at $1,015.20 the session before. Palladium rose 0.7% to $767.60.
Source: BusinessDay
