Gold falls in retreat from two-month high as Trump policies digested

PUBLISHED : Wednesday, 25 January, 2017, 4:29am
UPDATED : Wednesday, 25 January, 2017, 4:29am

Gold fell nearly 1 per cent on Tuesday, sliding from a two-month peak as investors

took stock of US President Donald Trump’s first policy moves and the dollar stabilised after plumbing seven-week lows this week.

Trump formally withdrew from the Trans-Pacific Partnership trade deal on Monday and told U.S. manufacturing executives he would impose a hefty border tax on firms that import products

after moving American factories overseas.

“It’s all been flagged and it’s all playing out according to the well-rehearsed script of Trump and his advisers,” Robin Bhar, Societe Generale’s head of metals research, said.

“The high in gold is an opportunity to take a bit of profit,” Bhar said, adding that the price was stuck in a US$1,120-$1,220 range.

Trump’s protectionist statements and a lack of detail on policy have led some investors to opt for gold, which is often seen as an alternative investment in times of geopolitical and financial turmoil. It rose to its highest level since November 22 during Tuesday’s session before giving back gains.

Spot gold was down 0.77 per cent at $1,208 an ounce after peaking at $1,219.59. U.S. gold futures slipped 0.4 per cent to settle at $1,210.8.

The dollar index, which measures the greenback against a basket of currencies, recovered to about 100.330 after falling to a seven-week low of 99.899 in the previous session.

Gold bulls say history may repeat as President Trump comes in

In 2017, precious metals prices are projected to fall 7 per cent mainly due to weak investment demand, prospects of a stronger dollar, and rising real interest rates, the World Bank said in its quarterly Commodity Markets Outlook on Tuesday.

Gold prices are expected to decline 8 per cent, it said. Analysts said the gold market was seeking clarity from Trump’s administration on tax and spending policies that could impact growth and provide clues on the direction of US interest rates.

Gold is highly sensitive to rising US rates, which increase the opportunity cost of holding the non-yielding asset while boosting the dollar, in which it is priced.

Buying in gold had increased in early December but volume traded on the Shanghai Gold Exchange has eased continually since then, Standard Chartered said in a note. Typically, during a

strong season, gold buying rises as early as eight weeks ahead of the Lunar New Year, which falls on Saturday, January 28.