January 30, 2017 / 10:31 AM / 3 years ago

PRECIOUS-Gold supported by U.S. and European political uncertainty

* Market watching Trump and European elections
    * Fed's monetary policy meeting starts Tuesday

 (Updates prices; adds comment, second byline, NEW YORK
    By Marcy Nicholson and Pratima Desai
    NEW YORK/LONDON, Jan 30 (Reuters) - Gold rose on Monday as
political uncertainty created by U.S. President Donald Trump's
move to ban people from seven Muslim-majority countries, and by
elections in Europe, supported prices. 
    Traders reported subdued activity because of the Lunar New
Year holiday in many Asian countries and some nervousness before
the Federal Reserve's two-day meeting on monetary policy
starting on Tuesday.
    Spot gold was up 0.4 percent at $1,196.20 an ounce by
3:18 p.m. EST (2018 GMT). That compared with Friday's 2-1/2-week
low of $1,180.65. U.S. gold futures settled up 0.4
percent at $1,193.20 per ounce. 
    "There is an element of geopolitical risk which is
supporting the gold market," said James Steel, chief metals
analyst for HSBC Securities in New York.
    Trump's administration tempered a key element of his
immigration ban, but the move reinforced growing worries about
investing in the United States, analysts said. 
    "Gold's future direction will depend on the dollar, U.S.
monetary policy and long-term interest rates," said Commerzbank
analyst Carsten Fritsch.
    "The immigration ban added to risk-off sentiment and boosted
gold earlier ... There is also political risk coming up in the
form of elections in France and the Netherlands." 
    The Fed, which will meet for a two-day meeting starting on
Tuesday, raised interest rates in December. At that time it
signaled as many as three rises in 2017 as the Trump
administration takes over with promises to boost growth through
tax cuts, spending and deregulation. 
    Higher rates could mean a higher U.S. currency, which makes
dollar-denominated gold more expensive for holders of other
currencies, potentially dampening demand.
    "We maintain a cautious view on gold, taking into
consideration the expectation of an improving growth outlook,
rising interest rates and a strengthening dollar," Julius Baer
analysts said in a note.
    "That said, we acknowledge the upside risks related to
recent actions taken by President Trump, such as the immigration
ban. Should he become the feared 'unguided missile',
uncertainties would increase, fostering safe-haven demand and
pushing gold prices significantly higher." 
    Technically, gold is struggling to stay above the 21-day
moving average around $1,191 an ounce. A sustained break above
is expected to meet resistance at $1,200 and $1,220, near the
January highs. Support is at $1,176, the 55-day moving average.
    Among other precious metals, spot silver gained 0.08
percent at $17.13 per ounce. Platinum rose 0.2 percent at
$986 and palladium gained 0.1 percent at $737.

 (Additional reporting by Arpan Varghese in Bengaluru; Editing
by Adrian Croft and Chizu Nomiyama)
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