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Gold hits 1-month high after Trump doubts knock dollar, stocks

Gold bullion bars and coins.
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Gold bullion bars and coins.

Gold rallied on Monday after President Donald Trump's failure to push through a health-care 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 currency basket and drove a drop in stock markets, with European indices sliding nearly 1 percent in early trade and U.S. stock index futures hitting six-week lows.

Spot gold rose 0.94 percent at $1,255.30 an ounce, after hitting a one-month high of $1,261.03 earlier. U.S. gold futures for April delivery were up $7.20 to settle at $1,255.70.

"This is entirely driven by the weaker U.S. dollar," Commerzbank analyst Carsten Fritsch said. "The euro is at the highest level versus the greenback since immediately after the U.S. election. The Trumpflation trade is being priced out after the failure to repeal Obamacare."

Gold had already rallied sharply from its March 15 low following 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. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

The metal ran into resistance in earlier trade at its 200-day moving average, now at $1,259 an ounce. The 200-day average also halted last month's sharp price rally. A close above that threshold could trigger follow-through buying, analysts said.


"While the bull camp is back in control of the gold market, it may be difficult to re-test the 2017 high above $1,261 unless risk-aversion continues to grow," futures analysis and forecasting specialist Hightower said in a report on Monday.

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.

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.

Spot silver gained 1.88 percent at $18.08 an ounce, off an earlier three-week high of $18.124, while platinum was 0.79 percent higher at $968.60. Palladium was down 1.98 percent at $792.97, after hitting a two-year peak of $815.40 on Friday.