Futures & Commodities

Gold claws way back into the black after Trump sacks Tillerson

Key Points
  • Spot gold up in a range of $1,318-$1,327/oz — technicals
A gloved hand stacks bars of gold into a pyramid.
Leonhard Foeger | Reuters

Gold bounced into positive territory on Tuesday as the dollar lost ground after news that U.S. President Donald Trump has replaced Secretary of State Rex Tillerson while U.S. inflation data was in line with forecasts.

Spot gold was up 0.27 percent at $1,326.18 an ounce by 12:25 p.m. EST, while U.S. gold futures for April delivery gained 0.44 percent to $1,326.60.

Trump fired Tillerson on Tuesday after a series of public rifts over policy on North Korea, Russia and Iran, replacing his chief diplomat with loyalist CIA Director Mike Pompeo.

The dollar index gave up its gains and fell 0.13 percent to 89.78, making commodities priced in the greenback cheaper for buyers using other currencies.

Also weighing on the dollar was news that U.S. consumer prices cooled in February, the latest indication that an expected pick-up in inflation is likely to be only gradual.

Some investors had been worried that a stronger than expected CPI reading could stoke expectations that the Federal Reserve will raise interest rates four times rather than three this year.

Georgette Boele, commodity strategist at ABN AMRO in Amsterdam, said gold was vulnerable after it had failed three times to rally since touching a 1-1/2 year peak of $1,342.70 on Jan. 25. "Overall the outlook is not looking that great in the short term. I still expect prices to go towards $1,300."

In other precious metals, silver rose 0.5 percent to $16.57 an ounce. Net long positions in U.S. silver futures increased for the first time since January, UBS analyst Joni Teves said in a note.

"Silver has been such an underperformer of late and one of the few positive factors currently is that net length is very lean. Despite recent gains, net speculative positions in silver are still only 18 percent of the record."

Platinum rose 0.54 percent to $967.80 an ounce, while palladium climbed 1.52 percent to $992.50.

ING analyst Oliver Nugent said in a note that the platinum price will struggle to move back above palladium.

"Based on our own forecasts, we don't think such a move will happen for the next few years due to platinum's weaker fundamentals with the palladium backwardation actually making it more expensive for investors to short the ratio."

The platinum/palladium ratio was at 0.978, up from 0.943 in late February and 0.85 in mid-December. Palladium flipped to a premium over platinum last September for the first time since 2001.