LONDON: Gold climbed on Tuesday to the highest in nearly a week as tough travel restrictions by US President Trump unnerved markets and prompted investors to buy bullion as risk insurance.
Spot gold had risen 0.3 per cent to $1,199.01 per ounce by 1036 GMT after earlier touching its highest since January 25 at $1,203.
US gold futures gained 0.4 per cent, to $1,197.90.
The dollar and stock markets fell in the wake of Trump’s sacking of US top government lawyer Sally Yates who refused to defend his stringent curbs on travel from seven Muslim-majority nations.
“Clearly Trump remains the main driver for gold. He has really turned from being a bit of a foe of gold to a friend with the uncertainty of his policies,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
“We’re not getting any news on fiscal spending and tax cuts, instead we’re hearing about protectionism and a tough stance on immigration. That’s unnerving the market.”
A weaker dollar supported bullion while traders were turning their attention to a two-day meeting of the US Federal Reserve starting later in the day for clues on the outlook for US.
interest rates.
Higher rates could mean a stronger US currency, which makes dollar-denominated gold more expensive for holders of other currencies, potentially dampening demand.
The dollar index, which measures the greenback against a basket of currencies, was slightly weaker and on track for a 1.9 per cent fall this month — its worst start to the year since the financial crisis.
“There could be some growth challenges if the ban is prolonged. So the current risk aversion (driving gold markets) comes as no surprise,” said OCBC analyst Barnabas Gan.
“The announcement (on Sally Yates) provided the impetus for gold to break through $1,200,” MKS PAMP Group trader Sam Laughlin said in a note.
Commerzbank said in a note that gold was also finding support “from the expectation of a significantly (though probably only temporarily) higher inflation rate in the Eurozone”.
Eurozone inflation jumped more than expected in January on a surge in energy prices as economic growth accelerated and unemployment fell to its lowest level in more than seven years, data from the European Statistics office showed on Tuesday.
Spot gold may edge up to $1,205 per ounce, as it has pierced resistance at $1,197, according to Reuters technical analyst Wang Tao.
Meanwhile, spot silver added 0.5 per cent to $17.20 per ounce while platinum was unchanged at $985.24 and palladium rose 0.9 per cent to $746.60 per ounce.
— Reuters
