Gold steadied on Thursday as uncertainty regarding the economic policies of new U.S. President-elect Donald Trump helped support the precious metal even as some investors returned to riskier assets such as stocks.
Trump's plans call for new infrastructure and massive tax cuts could boost the U.S. budget deficit. Coupled with protectionist trade policies, some are concerned the policy mix would ultimately hit the dollar and increase inflation.
"In the long term, a Trump victory is positive for gold because of the prospects of a higher budget deficit to finance all these infrastructure and tax cuts," Commerzbank commodities analyst Carsten Fritsch said.
Rising inflation and budget deficits are often seen as positive for gold prices. Trump's victory has also called into question an expected increase in U.S. interest rates in December.
Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion and is seen as a safe-haven in times of uncertainty. Trump has also pledged to tear up or renegotiate international trade deals, which could unleash a wave of protectionism and stall a tentative global economic recovery.