Gold rallies as Trump's quagmire batters dollar to November low

Gold rallies as Trump's quagmire batters dollar to November low

Spot gold was up 1 per cent at $1,249.43 an ounce at 1248 GMT, its highest in two weeks and taking its gains since a May 9 low of $1,213.81 to 3 per cent.

Gold prices hit a two-week high on Wednesday as Asian stocks slipped and the dollar was pressured after underwhelming U.S. housing data and reports that U.S. President Donald Trump sought an end to an Federal Bureau of Investigation probe into his former security adviser.

"(Gold) is seeing a pullback after yesterday's strong performance - it needs to take a breather", said Heraeus precious metals trader Alexander Zumpfe. The memo raises questions about whether Trump tried to interfere with a federal investigation.

Despite a small dip in the commodity's value as of this writing, gold has been the beneficiary of the political turmoil that has racked the US since Donald Trump assumed the presidency.

This inverse relationship between the USA dollar and gold has held throughout history and was one of the major reasons for the most recent gold rally from 2000 to 2010. We now wait to see whether the troubles begin to die down and move out of the headlines or whether it is going to continue and the gold prices are likely to move according to how the situation surrounding these events pan out.

"An inherently weaker dollar was seen because of the Trump rhetoric", said analyst Barnabas Gan at OCBC. Investors are questioning whether Trump can push through tax cuts and deregulation and fuelled demand for safe-haven assets including gold. A combination of these events and bad data from the United States has snowballed into a huge problem for the dollar and as we have seen over the last few months, gold bulls have taken full toll of any weakness in the dollar. The White House came out and denied that such information was shared. The US dollar index also slipped to its lowest level since Trump's election in November.

Spot gold may retrace moderately to a support at $1,252 per ounce, before retesting a resistance at $1,264, according to Reuters technical analyst Wang Tao. Further, the USA economy is reporting disappointing economic data, as consumer spending is coming in below expectations, as is inflation....

European shares were down 0.8 percent on Thursday, while world stocks extend their steepest fall in more than six months.

In late 2011, gold prices peaked at close to $1,900 per ounce, then retreated steadily to levels of just over $1,000 per ounce at the end of 2015 and are now in the $1,240 per ounce zone.

Gold was not the only commodity to improve overnight, with silver up 0.6 per cent at $US16.92 an ounce and platinum 0.7 per cent higher at $US944 an ounce.

On the Shanghai Futures Exchange, gold for December delivery added 0.4 percent to 281.05 yuan a gram, while silver rose 0.2 percent to 4,120 yuan a kilogram.

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