Gold steady as political worries linger

Lawrence Kim
March 17, 2018

Gold prices fell 0.7 percent in the previous session, under pressure from a stronger USA dollar.

Spot gold was unchanged at $1,315.80 per ounce at 0100 GMT. Spot gold has fallen 0.6 percent so far this week.

Gold prices fell 0.7 percent in the previous session, under pressure from a stronger US dollar.

The dollar index consolidated gains versus a currency basket before next week's US Federal Reserve meeting, while the yield on US Treasuries and German Bunds rose for the first time in four days.

US gold futures for April delivery fell 0.2 percent to $1,315.80 per ounce. Investors, however, were looking ahead to an expected US interest-rate rise at a US Federal Reserve meeting starting on March 20.

Gold is highly sensitive to rising U.S. interest rates, because it becomes less attractive to investors since it does not bear interest. Tit-for-tat diplomatic expulsions by Russian Federation and Britain over an attack with a military-grade nerve agent on English soil only underlined gold's appeal.

"I think Kudlow's comments will probably support more of a trade war rhetoric than a stronger dollar", said a Hong Kong-based trader, adding "gold needs to close above the US$1,330 level to start getting some traction".

USA stocks opened higher, supported by strong economic data, although fears that Trump's decision to impose fresh tariffs on China may escalate into a trade war simmered in the background.

This uncertainty deepened after the Washington Post reported that US President Donald Trump will remove HR McMaster as his national security advisor and the New York Times said US special counsel Robert Mueller had issued a subpoena for documents related to Trump's businesses.

Interest in gold has been fanned by USA policy uncertainty after the departure of former U.S. secretary of state Rex Tillerson and top economic advisor Gary Cohn, and planned tariffs on aluminium and steel which sparked fears of a trade war.

"Gold is finding support from the escalating political crisis between the United Kingdom and Russia", Commerzbank said in a note, but added it could face headwinds after the USA president's new economic adviser Larry Kudlow had spoken out in favor of a strong dollar.

"Traders remain incredibly indecisive about the course of Fed policy, and all asset markets are enduring position adjustments where the lack of investor participation could exaggerate price action".

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.53 percent to 838.15 tonnes on Thursday from 833.73 tonnes on Wednesday.

In other precious metals, silver was up 0.5% at $16.45 an ounce.

Other reports by Click Lancashire

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