Gold hits 1-month top after Trump doubts knock dollar and shares

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NEW YORK/LONDON: Gold rallied more than 1 percent on Monday after U.S. President Donald Trump’s failure to push through a healthcare reform package on Friday raised questions over his ability to deliver promised tax cuts and spending plans.

That knocked the dollar to a four-month low versus a basket of currencies. Stocks and U.S. long-dated Treasury yields slipped but recovered lost ground as investors hoped Trump will still be able to bolster the economy.

Spot gold was up 1 percent at $1,256.02 an ounce by 2:28 p.m. EDT, having touched a one-month high of $1,261.03 and failing to hold above the 200-day moving average for the second time in a month.

U.S. gold futures for April delivery settled up 0.6 percent at $1,255.70.

“This is entirely driven by the weaker U.S. dollar,” Commerzbank analyst Carsten Fritsch said. “The Trumpflation trade is being priced out after the failure to repeal Obamacare.”

Gold had already rallied sharply from its March 15 low after a less hawkish policy statement than expected from the Federal Reserve, which dampened expectations for near-term increases in U.S. interest rates.

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

A close above the 200-day average, now at $1,259 an ounce, could trigger follow-through buying, analysts said.

The world’s largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, reported an outflow of 1.8 tons on Friday.

U.S. Commodity Futures Trading Commission data showed on Friday, however, that hedge funds and money managers boosted their net long positions in COMEX gold in the week to March 21 after two weeks of cuts.

“Tactical investors increased their exposure to gold after the FOMC meeting, primarily by establishing fresh long positions as well as further short-covering activity,” said Standard Chartered in a note.

“However, positioning is still relatively light, suggesting room for additional exposure to gold.”

China’s net gold imports via main conduit Hong Kong rose 50.8 percent month on month in February to 47.931 tons, data showed.

Silver was up 1.8 percent at $18.06 an ounce, off an earlier three-week high of $18.12.

Spot platinum gained 0.5 percent to $965.50, after rising to $982.60, a three-week high and around the level where the 50-day and 200-day moving averages nearly converge.

Palladium was down 1.7 percent at $795.10 after hitting a two-year peak of $815.40 on Friday.