Published: Fri, May 19, 2017
Markets | By Noel Gibbs

Gold rises to two-week high amid Trump concerns

Gold rises to two-week high amid Trump concerns

US gold futures were 1.1 per cent higher at $1,249.90 an ounce.

Spot gold rose for a fifth day and was up 1.8 percent at $1,258.38 an ounce at 1414 GMT, after hitting $1.259 an ounce, the highest since May 1.

U.S. President Donald Trump is under pressure to explain whether he tried to interfere with a federal investigation after reports that he asked then-FBI Director James Comey to end a probe into his former national security adviser Michael Flynn.

"The $US34/oz decline in gold prices during the week ended May 9 was accompanied by the second-largest weekly decline in gross long positions", said Standard Chartered in a note. "I hope you can let this go", Trump told the Federal Bureau of Investigation director, according to a Comey memo, as cited by the New York Times.

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A sharp deterioration in risk appetite triggered by the latest political drama in Washington put strong upward pressure on gold, especially with the dollar at fresh 6-month lows.

Upwards pressures come from gold's risk mitigation in the context of the North Korean missile test, the large-scale cyber-security scare and controversies surrounding USA president Donald Trump's dealings with Russian and handling of intelligence.

"This is related to a flare-up of geopolitical risks with what's happening in the USA with Trump and Russian implications", Capital Economics analyst Simona Gambarini said. The White House came out and denied that such information was shared.

"In the shorter term it (weaker US data) could lift gold prices to a certain extent as it ensures the pace of the interest rate hikes do not accelerate", said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

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"The rise in gold is largely a dollar play, with the dollar weakening because of Trump", said Barnabas Gan, an economist at Oversea-Chinese Banking Corp., who also flagged overseas tensions.

Lower yields reduce the opportunity cost of holding non-yielding gold, while a weaker dollar makes bullion cheaper for non-US investors.

In other precious metals, silver was up 1.1 per cent at $US16.63 an ounce, after money managers cut their net long stance in silver to the smallest since February 2016 from a record high last month. If gold can hold above that level it could rise to its long-term downtrend line at $1,287 an ounce, said technical analysts at Commerzbank.

In late 2011, gold prices peaked at close to $1,900 per ounce, then retreated steadily to levels of just over $1,000 per ounce at the end of 2015 and are now in the $1,240 per ounce zone.

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