Gold brushes 7-week peak on weak dollar after Trump briefing

Source : REUTERS
Last Updated: Thu, Jan 12, 2017 19:43 hrs

By Eric Onstad

LONDON (Reuters) - Gold surged above $1,200 an ounce to its highest level in seven weeks on Thursday as the dollar fell following U.S. President-elect Donald Trump's long-awaited news briefing the day before.

But analysts warned that gold's revival since mid-December may be running out of steam as the dollar was likely to rebound once Trump moves ahead with his economic plans.

Spot gold was up 0.9 percent at $1,202.42 per ounce by 1340 GMT, after touching a high of $1,206.98, its strongest since Nov. 23, while U.S. gold futures rose 0.5 percent to $1,202.50 per ounce.

Trump delivered a wide-ranging briefing on Wednesday that lasted longer than expected but contained no details on tax cuts and infrastructure spending, analysts said.

That sent the dollar index sliding to the lowest in nearly a month, having hit a one-week high on Wednesday.

"It's a mess frankly, which is a reflection of the fact that there's no clarity on U.S. economic policy," said Tom Kendall, head of precious metals strategy at ICBC Standard Bank.

"For the time being, I'm sticking to my thesis that this move can go a bit further, but we're running out of steam."

Gold is up 7 percent since a 10-1/2 month low on Dec. 15.

Trump's calls for tax cuts and more infrastructure spending have boosted U.S. shares and the dollar, as well as driving a sell-off in Treasuries, but protectionist statements and a flurry of Tweets have kept many investors from adding to risky positions.

"The biggest threat to gold in the first quarter is if the new Trump administration can push forward an aggressive fiscal agenda, in particular a tax incentive for U.S. corporations to repatriate earnings held offshore," Kendall said.

Expectations of a stronger U.S. economy and higher interest rates would likely cap gold, said Carsten Menke, commodities research analyst at Julius Baer in Switzerland.

“Despite moving back to $1,200 per ounce, we see no lasting recovery for gold," he wrote. "The market lacked support from physical buying ... which we believe is a precondition for a lasting recovery."

The outlook for U.S. rates may become a little clearer when Federal Reserve Chair Janet Yellen appears at a webcast town hall meeting with educators on Thursday.

Spot silver rose 0.7 percent to $16.84 an ounce after hitting a four-week high of $16.98.

Platinum climbed 1.2 percent to $983.90, after touching a high of $990.10, its strongest since Nov. 10.

Palladium added 0.2 percent to $755.72.

(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Ruth Pitchford and Alexander Smith)

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