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Gold rises as investors focus on Trump agenda

PROSPECTING GOLD
AP

Gold prices held firm near one-month highs on Tuesday, supported by political and economic uncertainty in the United States and expectations of a lower dollar.

Spot gold was down 0.32 percent at $1,249.84 per ounce, after touching its highest in a month at $1,261.03 the day before.

U.S. gold futures for April delivery dropped 10 cents to settle at $1,255.60.

Traders report more investor buying interest after President Donald Trump failed to push through healthcare reform, fueling concern about his ability to implement his economic policies.

That worry also saw the dollar against a basket of currencies hit a four-and-a-half month low on Monday. This makes dollar-denominated gold cheaper for holders of other currencies, potentially boosting demand.

"The dollar has come under a lot of pressure and lifted gold," said Julius Baer analyst Carsten Menke. "Changing perceptions of the outlook for U.S. interest rates will create volatility in gold."

The U.S. Federal Reserve raised rates earlier this month, boosting the dollar, which could strengthen further on expectations of further rises after comments from its policymakers.

However, some analysts expect to see the Fed on hold for some time, leaving the dollar to drift lower.

"Dollar weakness is something that could propel prices higher, especially in light of the latest CFTC report that shows dollar longs building for a third week in a row despite ongoing weakness," said INTL FCStone analyst Edward Meir in a note.

Investor demand for gold can be seen in the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, which reported an inflow of 2.7 tons on Monday.

Traders see technical resistance for gold around $1,260, near the 200-day moving average, while support is expected to kick in at a Fibonacci retracement level of about $1,245.

In other metals, spot silver gained 0.17 percent to $18.10 per ounce. Platinum slipped 1.45 percent to $949.49 per ounce.

Palladium inched up 0.34 percent to $790.25 per ounce.

The industrial metal used in autocatalysts hit $815.40 an ounce last week, its highest since March last year of expectations of growing demand from car makers.

Analysts, however, are not convinced the fundamentals justify current price levels.

"U.S. car sales are moving sideways, inventories are rising and dealers are upping incentives," Menke said.

"China's car sales numbers for March will be crucial, profit-taking will be triggered if weakness is confirmed. European sales are solid, but slowing from last year."