January 23, 2017 / 11:26 AM / a year ago

PRECIOUS-Gold touches two-month high as Trump uncertainty hits dollar

* Spot gold touches highest since Nov. 22
    * Speculators raise gold longs for second week
    * Gold faces resistance at $1,219
    * Palladium slips from 20-month high

 (Updates prices; adds comment, second byline, NEW YORK
dateline)
    By Marcy Nicholson and Peter Hobson
    NEW YORK/LONDON, Jan 23 (Reuters) - Gold rose to a two-month
high on Monday, as unease over the economic policies of U.S.
President Donald Trump pushed investors towards safer assets
while the dollar and U.S. bond yields fell. 
    Trump formally withdrew the United States from the
Trans-Pacific Partnership trade deal and told U.S. manufacturing
executives he would impose a hefty border tax on firms that
import products after moving American factories overseas.
  
    The U.S. dollar fell to a seven-week low against a
basket of key world currencies and global stock markets declined
amid investor concerns over Trump's protectionist
rhetoric. 
    A weaker dollar makes gold cheaper for holders of other
currencies, while lower yields reduce the opportunity cost of
holding non-yielding bullion. 
    Spot gold was up 0.6 percent at $1,216.33 an ounce by
3:22 p.m. EST (2022 GMT), after tapping $1,219.43, its highest
since Nov. 22. U.S. gold futures settled up 0.9 percent
at $1,215.6 per ounce. 
    "The story is one of a weaker dollar and political
uncertainty," said Danske Bank analyst Jens Pedersen. 
    Gold finished last week up 1 percent for its fourth straight
week of gains after speculators raised their net long position
in COMEX gold contracts for a second week in the week to Jan.
17. 
    "Momentum indicators are biased to the upside," said
ScotiaMocatta analysts, targeting $1,255.70 an ounce. 
    Despite his protectionist measures, Trump's plans for
government spending, tax cuts and deregulation would likely
boost the dollar and U.S. stocks if enacted.  
    "That is going to take some of the wind out of gold as an
alternative investment or as a risk hedge," said Mitsubishi
analyst Jonathan Butler.
    Views of the gold market, however, seem divided over which
aspects of Trump's policies should be given greater weighs, said
Standard Chartered in a note.
    "Despite heightened uncertainty, we think Q1-2017 is still
stacked unfavorably for gold given the fragile market in India
ahead of the union budget (1 February) and the rising
probability of U.S. rate hikes," Standard Chartered said.
    Among other precious metals, palladium was down 1.7
percent at $772.50 an ounce, after touching $795.60, its highest
since May 2015.
    Analysts at Julius Baer said that investors had been too
optimistic after palladium, which is used in the automotive
industry for emission-controlling catalytic converters, jumped
4.8 percent last week. 
    Car sales this year in China and the U.S. would fall short
of investors' hopes and "a dent is looming," they said.
    Silver rose 0.6 percent at $17.17 while platinum 
 gained 0.4 percent at $980.40.

 (Additional Reporting by Nallur Sethuraman and Arpan Varghese
in Bengaluru; Editing by David Goodman and Nick Zieminski)

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