Gold hits highest level in over a month on Brexit, Trump concerns

Source : REUTERS
Last Updated: Tue, Jan 10, 2017 23:42 hrs

By Zandi Shabalala

LONDON (Reuters) - Gold rallied to its highest level in more than a month on Tuesday as the dollar dipped ahead of a news conference on Wednesday by U.S. President-elect Donald Trump.

The market is looking for more clues on Trump's spending plans in the first speech since his shock win in November.

The pound and stocks also slid on fears of a "hard" Brexit after British Prime Minister Theresa May said at the weekend she was not interested in Britain keeping "bits" of its EU membership.

Gold, often seen as an alternative investment during times of political and financial uncertainty, benefited from the risk-averse sentiment in the market.

Spot gold hit its highest since Nov. 30 at $1,190.46 an ounce, and was up 0.6 percent at $1,188.20 an ounce at 1520 GMT.

U.S. gold futures were up 0.3 percent to $1,188.40 per ounce.

ABN AMRO commodity strategist Georgette Boele said the combination of a soft dollar, lower U.S. yields and risk aversion created a supportive environment for gold.

"We have this Trump conference coming up tomorrow and the market seems to be a bit nervous ahead of it," Boele said, adding that this sentiment would be short-lived as U.S. interest rates are expected to rise at least three times, denting gold.

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

However, ETF Securities analyst Martin Arnold said the dollar had rallied "too far too fast" and that a pullback in the price was likely which would support gold for a while to come.

Strong physical demand from the Chinese new year also buoyed prices, Marex Spectron's head of precious metals David Govett said. He said investors were starting to buy gold "as the great unknown of the Trump presidency looms".

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 1.06 percent to 805.00 tonnes on Monday. The holdings have dropped about 15 percent since November's U.S. presidential election. [GOL/ETF]

Silver inched up 1.3 percent to $16.78 an ounce, its highest since Dec. 15. Platinum bucked the trend, slipping 0.2 percent at $976.80 per ounce, but still near a two-month highs.

Palladium was barely changed at $760 per ounce.

(Additional reporting by Swati Verma and Nallur Sethuraman in Bengaluru; Editing by Alison Williams)

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